Homework answers / question archive / Conduct a brief analysis for the company Whole Foods must use some information from the book (I will send you later) and other credible sources from the internet

Conduct a brief analysis for the company Whole Foods must use some information from the book (I will send you later) and other credible sources from the internet

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Conduct a brief analysis for the company Whole Foods must use some information from the book (I will send you later) and other credible sources from the internet. (5-6 pages)

- Answer each of the 3 sections below in detail.

1. The identification of the company's internal strengths and weaknesses (500 words minimum)
2. The identification of the company's external strengths and weaknesses (500 words minimum)
3. The company's structure and control systems and how they match its strategy (500 words minimum)

Please make sure to check the file below for an example of how previous students write the paper. The file named “Written analysis of Yahoo!” (prefer Appendix 6 page 20 and Appendix 8 page 24 to help you get a picture of how it should look).

-Format: This will be submitted on Turnitin.com

1. MLA format for reference page
2. Use number reference system for in-text citation (I already included a file named “in-text citation” below for you as an example)

 Case Study #23: Is Yahoo!’s Business Model Working in 2011 and Today? BUS 189 - Prof. Larry Gee Team # 5 - The A+ Students Aimee Gohil - # 7260 Sean Luis - # 0283 PM - Karin Proven - # 7884 Krysta Sumabat - # 2199 Friday, December 4 2015 2 Table of Contents Appendix 1: History, Development, and Growth ……….………………………………………. 3 Appendix 2: Internal Strengths and Weakness ….………………………………………………. 8 Appendix 3: Nature of External Environment …..……………………………………………... 11 Appendix 4: SWOT Analysis…………….………….…………………………………………. 12 Appendix 5: Corporate-Level Strategy ...………………………………………………………. 18 Appendix 6: Business- Level Strategy …………………………………………………………. 20 Appendix 7: Company Structure and Control Systems………...………………………………. 22 Appendix 8: Recommendations...………………………………………………………………. 24 Case Question 1 ……….………………………………………………………….…….……… 25 Case Question 2 ……….………………………………………………………………..……… 29 Case Question 3 ………………………………………………………………………..………. 32 Case Question 4 ……………………………………………………………………….….……. 36 Conclusion …………………………………………………………………………….….……. 38 Bibliography………………………………….………………….……………………….….…. 40 3 Appendix 1: The History, Development, and Growth Yahoo! is a global technology company best known and recognized for their search engine, web portals, email services, and similar technologies. Yahoo! is currently working hard to stand out from competitors by executing several strategies, including corporate level strategies such as acquisitions, horizontal and vertical integration. It is clear with the struggles Yahoo! has faced over the past 7 years that they need to regain market share, expand their demographics, improve innovation, and build brand loyalty to be profitable. The company’s past strategy of acquisitions has been costly and has not produced the desired result. Yahoo! was founded by David Filo and Jerry Yang and the company is based in the heart of the Silicon Valley in Sunnyvale, California. (McCullough) In 1994, David and Jerry were graduate students at Stanford University, studying to obtain their Ph.D. in Electrical Engineering. The World Wide Web was a tool they used, but the user experience left them extremely frustrated. Thousands of pages would appear which were random and unorganized, making the tool overly cumbersome and difficult to use effectively. Realizing there was a better way to organize the information, the pair found a way to manage all these websites by specific content. What David and Jerry provided was a hierarchically organized index compared to an index of pages. They named this organized hierarchy “David and Jerry’s Guide to The World Wide Web” and published it in 1994. Initially their site was used mainly by their friends and for their own personal use. However, over time, more and more people came across the time saving website, spreading the word about “David and Jerry’s Guide to The World Wide Web.” The attention pushed the once personal organization space into the realm of a viral website. As the number of visitors 4 consistently increased, David and Jerry realized they had a valuable and unique commodity on their hands. Both graduate students decided to put aside their studies at Stanford in order to focus on their search engine and build the business. They renamed their website and company to Yahoo! and it was incorporated in 1995. Yahoo! became the first published web portal. The team was then joined by the first CEO, Tim Koogle, who worked vigorously in order to develop the initial business strategies. After recruiting many people in the marketing and software engineering departments, Yahoo! grew a competent team to accomplish their new strategies. One of the company’s strategies was to attract and retain various consumers and to become more than just a search engine. With this goal in mind, Yahoo!’s team created the following portals: personal, government, cultural, corporate, stock, and internet shopping portals. Yahoo! benefitted from each of these portals in different ways. The internet or e-commerce portal brought in revenue through implementation of user (seller and buyer) transaction fees. In 1996, one year after being incorporated, the company had revenue of $21.5 million. In 1998, after Koogle’s implementation of the new business strategy and model, the revenue had grown to $203 million. (Hill and Jones) Over the years, Yahoo! wanted to become a “mega brand” for all online users. (Hill and Jones) Management put a huge focus on adding more content, which led to adding Rocketmail, Geocities, Broadcast.com, instant messaging, dating sites, and more retail sites. Furthermore, an extremely important factor of the new business strategy was the use of a customization feature. When having a customized website, customers’ needs and wants are specifically addressed. It’s an understood phenomenon called “switching costs” that prevents customers from moving to new providers. When people invest time into customizing their profile with Yahoo!, then it is less likely they will go elsewhere for the same information, unless someone 5 else created a killer application. Attracting people with the option for customization was successful. We see this success in the early 2000’s when the company’s market value was approximately $220 billion, with about 15 million visitors a day. (Hill and Jones) In 2015 however, due to no longer being in the dot-com era, increased competition, and other companies such as Google and Facebook who were offering killer applications, Yahoo!’s market value has decreased to about $33.02 billion. (Yahoo Finance) Yahoo’s execute team saw several changes since it originated, including two interim CEOs Tim Morse (2011-2012) and Ross Levinsohn (2012). Carol Bartz, Yahoo!’s CEO from 2009-2011, had the arduous task to recover from a steep decline Yahoo! experienced in 2008. (See Figure 1). Bartz had begun to cut costs and worked to improve margins. It was stated Bartz changed the “organizational structure, replaced executives Figure 1 Gale Business Insights: Essentials 2015 gale Company Intelligence Database 2015 www.businessinsider.com and cut 5% of the workforce.” (Oreskovic) By looking at Yahoo!’s revenue statement, it is apparent that Bartz’s attempts to turn a profit were unsuccessful as Yahoo! still saw a steep decline all the way until 2011. Scott Thompson took the helm in 2012, after the interim CEO Tim Morse returned to his position as the company’s Chief Financial Officer. Thompson was Yahoo!’s CEO for less than a year, yet he implemented the filing of 10 patent infringement lawsuits against Facebook resulting in a partnership between the pair for new advertising. (Yousouf) After a resume scandal involving Thompson, he was fired from Yahoo! only four months after being hired. (Pepitone) In 6 2012, Yahoo! brought Marissa Mayer, an ex-Google executive, to the team to help Yahoo! define their vision and stay current in the dynamic environment. Yahoo! showed 700 million users per month, but the company still struggled with generating revenue. (Perlroth) Since 2012 Marissa Mayer is the youngest person to ever be a CEO of a fortune 500 company. (Leahey) The mission statement used to be “To be the most essential Global Internet Service for consumers and businesses.” This has been updated in their 24th revised mission statement that states Yahoo! is a guide focused on making users’ digital habits inspiring and entertaining.” (Le Ray) Yahoo has made many notorious acquisitions and has received the reputation that it “kills startups”. (Pepitone) The World Public Library shows Yahoo! has acquired nearly 90 different companies globally since 1997. Per CNN Money, some of the notable acquisitions include Broadcast.com which was acquired in April 1999 for $5.7 billion and GeoCities for $3.6 billion. Both were deemed unsuccessful with a hefty price tag (Pepitone). In 2003, under Terry Semel’s leadership, Yahoo! acquired Overture Services for $1.63 billion. SEC records state Overture Services, Inc. was an online advertising service that provided a “Pay-For-Performance” search which is the main area of Yahoo!’s generated revenue. Yahoo!’s revenues show that this expensive acquisition was a success because revenue continued to climb for four more years (See Figure 1). The spending continued under Semel. In July of 2004, Yahoo! acquired Oddpost to improve Yahoo!’s expertise in email services. The cost of the acquisition was $30 million. In 2012, under Marissa Mayer’s leadership, Yahoo! acquired Stamped. The Wall Street Journal stated Stamped was a mobile application company. This acquisition was right in line toward improving Yahoo!’s mobile realm. In 2013, Mayer also implemented the acquisition of Tumblr for $1.1 billion which included the acquisition of Tumblr’s founder, David Karp, as well. 7 This strategic move is seen more to obtain the talents of Karp over what Tumbler and their users have to offer. (O’Donnell) Most recently in July 2015, Yahoo! has acquired Polyvore, a leader in social shopping. This acquisition is intended to improve “consumer and advertising offerings”. (Business Wire) Looking over Yahoo!’s history, we conclude this is a business in constant flux. There has been a revolving door of leadership and ideas that clearly has an impact on the company’s health, productivity and profitability. Most acquisitions should have a positive impact on the bottom line for a business, but it appears Yahoo! is still unable to effectively utilize this realm. While Mayer has made strides in slowing the decline and leveling off revenues, it’s clear Yahoo! needs to make headway to compete in the dynamic environment. 8 Appendix 2: Identification of Company’s Internal Strengths and Weaknesses Strengths One of Yahoo!’s key strengths is their competitive advantage provided by their increasing user base. Within recent years, Yahoo! has made numerous acquisitions ranging from small startups, such as Summly, to popular websites, such as Polyvore and Tumblr. According to forbes.com, Tumblr is one of Yahoo!’s best acquisitions to date, not only for the number of users but also for its founder, David Karp. (O’Donnell) Through acquisitions, Yahoo! has been able to not only increase their user traffic, but also expand their demographics to bloggers, photo enthusiasts, the younger generation, and Millennials. Another strength Yahoo! is focusing its attention on is the mobile aspect of their company. They have made great strides in the industry by establishing a mobile presence through their inorganic growth strategy. Part of the strategy is to acquire smaller companies with engineering talent and mobile computing specialists, such as Stamped. (Efrati) By doing this, Yahoo! has been able to broaden and strengthen their expertise in the mobile segment as the usage of mobile devices such as smartphones and tablets continues to increase. Weaknesses While several of the acquisitions stated in “Strengths” have improved Yahoo!’s ability to compete in the dynamic market, some of the acquisitions have taken billions from the bottom line, hurting Yahoo!’s overall performance. Costly acquisitions, such as Broadcast.com and GeoCities have been shut down and the funds used have no return on invested capital. These 9 acquisitions hurt Yahoo!’s overall profit margin. It is clear Yahoo! is relatively weak compared to its peers when comparing revenues of rival companies. While their competitors, such as Google and Microsoft, have been increasing their revenues at a quick pace, Yahoo! is unable to register growth (See Figure 2). The disparity between revenues highlights Yahoo!’s competitive disadvantage. This disadvantage has led to sluggish revenues. Yahoo!’s small footprint in the social media and social networking segments is also a weakness. Although the company acquired Flickr and Tumblr to develop a greater presence in the Figure 2- Source: Gale Business Insights: Essentials 2015 Gale Company Intelligence Database 2015 social networking segment, they lack significant presence compared to their peers, Facebook and Google. Figure 3 shows social login preferences for Facebook was 45% and Google was 35% while Yahoo! Figure 3- Source: Olson, Michael. "Social Login Trends Across the Web for Q4 2014." Janrain. 2 Jan 2014. Web. 3 Nov 015 trailing far behind with only 7%. This discrepancy is very detrimental to Yahoo!’s future success and needs to be corrected to achieve profit. 10 Yahoo! also needs to have stability in leadership. There have been seven (7) Chief Executive Officers leading Yahoo! over the past decade, including two interim leaders, both in 2012. This constant change and shift leads to instability and a lack in confidence from consumers. Having an executive team that can build consumer confidence will help Yahoo! to achieve their goals. 11 Appendix 3: The nature of the external environment surrounding the company The external environment of Yahoo! is highly competitive with several opportunities and threats that exist in this environment that surrounds Yahoo!. An opportunity that Yahoo! can take advantage of is making business deals at regular intervals to improve their business. By doing this, Yahoo! can designate a revenue sharing agreement that benefits them both. A second emerging opportunity for Yahoo! is the strong growth in display advertising and mobile ad spending. Advertisers in the United States are expected to spend on various display ad formats served to desktops and laptops as well as mobile phones, tablets, and other devices. The rising spend will enable Yahoo! to boost their revenues. As Yahoo! continues to deliver products that cater to this market, they will be able to enjoy benefits from the positive trends in the industry. For external threats, Yahoo! is competing with social platforms that are major players in the industry. Facebook, for example, although is not the fastest growing social networking site, is gaining the highest number of visits. It has the potential to emerge as a medium that is cost effective for advertisers and has been proven to have the potential to emerge as an effective tool to reach audiences. Yahoo! suffers against better-performing social networking platforms in terms of user time, engagement, and advertiser interest. Another threat is the existence of stringent regulations. No matter the level of business, governments impose regulations and restrictions on companies and Yahoo is no exception. When the government passes new laws or makes changes, normal business processes can be affected, which can lead to legal ramifications, including fines and fees. 12 Appendix 4: A SWOT analysis After evaluating Yahoo!, we identified strengths that give them a competitive advantage in their industry. Ever since being appointed CEO of the company in 2012, Marissa Mayer has implemented changes that have made a positive impact and has allowed Yahoo! to gain some leverage. Firstly, as previously mentioned, Yahoo! enjoys a strong customer base as well as a significant reach. Various acquisitions contributed greatly to this. For instance, the acquisition of Flickr in 2005 allowed Yahoo to gain an entire online community of photo researchers and enthusiasts all around the world. Another example is the acquisition of the blogging site, Tumblr, which was made in 2013. Prior to this acquisition, Yahoo! had a total amount of 800 million monthly active users. Tumblr, which continues to grow faster than any other social network, increased Yahoo!’s monthly active user base to over 1 billion. (Garner) Also contributing to Yahoo!’s increased user base was the company’s launch of the refreshed Yahoo! Mail application for mobile phones and tablets. Since the launch, the application alone increased Yahoo! Mail’s daily active users to 110 million users globally, which is an increase of more than 120%. (Nieva) Secondly, Yahoo! has implemented the inorganic growth strategy to keep up with the continued growth of mobile usage all around the world. Out of Yahoo!’s 1 billion users, 575 million of them are active on mobile. (Smith) These numbers go to show just how important it is for Yahoo! to keep their mobile segment strong. Part of their inorganic growth strategy is to acquire smaller companies with engineering talent and mobile computing specialists. Over the last 2 years, Yahoo! purchased more than 37 companies, allowing them to become more 13 diversified and advanced in the fields of applications, mobile phones, and tablets, which are areas they had been lagging in compared to their peers. Yahoo!’s strengths allow them to stay in the fight against their competitors, but they possess weaknesses that prevent them from being more successful. One weakness is Yahoo!’s relatively poor performance compared to their peers. As shown in Figure 4, Yahoo! displays stagnant growth rates compared to Google and Microsoft, who have increasing revenues. Yahoo!’s revenues declined by 1.3% in fiscal year 2014 compared to fiscal year 2013. Google, on the other hand, had a revenue increase of 18.9%. Further, Facebook’s revenue grew by 58% during the same period. Another weakness, as mentioned earlier, is Yahoo!’s limited presence in social media and networking. They have always struggled to compete with their peers in this segment, and therefore have made various attempts to make a name for Figure 4- Source:Gale Business Insights: Essentials 2015 Gale Company Intelligence Database 2015 themselves. For example, in 2005, Yahoo! announced Yahoo! 360º, a personal communication portal that enabled users to create personal web sites, share photos, and maintain blogs. After just 2 years of operation, global visits to the 360º site dropped significantly. It never gained popularity in the United States, so Yahoo! decided to stop providing support for it. By 2009, the entire service was officially closed. During its 4 years of existence, it remained in its beta stage. The ideology behind this move was for Yahoo! to find ways to better-improve the service and help it to become more popular, but they were never successful. Today, Yahoo! still struggles to 14 find solutions that enables them to closely compete with Facebook and Google, who currently hold the leadership positions. Through the acquisition of Flickr and Tumblr, Yahoo! was able to expand their presence in the social networking segment. As shown above in Figure 3 (pg 9), they still sit far behind the leaders, Google and Facebook, with only 7% market share compared to Google’s 35% and Facebook’s 45%. Video sharing is another part of the social segment that Yahoo! lacks. In the past, they announced plans of video sharing platforms similar to YouTube, but they have yet to mark their presence in this segment. Lack of presence in these areas puts Yahoo! at a disadvantage compared to their competitors. Although Yahoo!’s weaknesses make it difficult for them to compete, there are still various opportunities that allow them to improve. One of these opportunities exists in their recent restructured partnership with Microsoft. In April 2015, the two companies made a new search deal that extends until 2020. According to Yahoo!’s Corporation Information page on Yahoo.com, the deal established a transformative relationship between the two companies where Microsoft exclusively provided paid and algorithmic search services on PC to Yahoo!. In this agreement, Microsoft pays Yahoo! a percentage of Bing Ads revenue delivered from Yahoo! searches. With the extension, Yahoo! is given the flexibility to improve the user search experience on both desktop and mobile devices. This agreement doesn’t limit Yahoo! because they still have the ability to use other back-end search providers, such as Google or Ask. A second opportunity Yahoo! can take advantage of is the positive trend in smart device usage. According to global statistics, smartphone shipment volume is expected to reach 1,733.9 million units by 2017. This represents a compound annual growth rate of 14% from the period of 15 2014 through 2017. By 2017, tablets and smartphones are expected to account for 87% of the overall smart connected devices around the world. (“Phablets Will Start”) Recently, it has been noted that Yahoo! has emphasized great focus in the mobile segment of their company. As previously mentioned, they introduced a new version of their mail product to capitalize on this growing trend. The new mail product was released across four platforms including desktop, iOS, Android, and Windows 8. In May of this year, Yahoo! released numerous updates to Flickr introducing additional intelligent tool features that are more user friendly, making it easier to access, organize, find, and share photos and videos across devices. Yahoo! is positioned to benefit from their strong focus on introducing products catered specifically for smart devices. It’s important to acknowledge advertising spending is still on the rise, Figure 5 Source: "Total US Ad Spending to See Largest Increase Since 2004 - EMarketer." Total US Ad Spending to See Largest Increase Since 2004 - EMarketer. Web. 1 Nov. 2015 and this is a revenue generator for Yahoo!. Figure 5 reveals that there has been positive momentum in the amount of advertising spent by companies and is expected to continue throughout 2018. The spending growth is an opportunity for Yahoo! to generate a big portion of revenues from display and mobile advertisements. According to industry estimates, worldwide mobile advertising generated $18 billion in 2014 compared to $13.1 billion in 2013. (Yakowicz) The increase was primarily due to the growth in smartphone and tablet usage. With the influx of spending, the mobile advertising space would be a key growth/opportunity area for Yahoo!. One last opportunity to mention is the increase in search queries. Figure 6 shows the constant upward trend of Internet users worldwide, reaching 3 billion users in 2014. Currently, 16 there are 3.2 billion users, and by 2021, the industry estimates there to be 3.8 billion users worldwide. An increase in internet users leads to an increase in the amount of internet searches. This means that search queries on Yahoo! properties are also expected to increase. Yahoo!’s initiative to improve its content will enhance user experience, resulting in greater market share in years to come. Reviewing the Figure 6 - Source: "Internet Users" Number of (2015). Web. 3 Nov 2015 struggles Yahoo! has faced since its inception, it’s clear to see there are many threats in this segment of industry. There are several things Yahoo! executives who are forming strategies must be aware of for them to succeed. It is important to remember, Yahoo! is a content portal and competing with social platforms already offered by industry leaders Figure 7- Source: "Infographic: Who's Really Using Facebook, Twitter, Pinterest, Tumblr and Instagram in 2015" is very difficult but vital. While the social network market is rapidly growing, Facebook is gaining the majority of the visits. As shown in Figure 7, the total amount of current social network users is 179.7 million users. Of that amount, 156.5 million of them are Facebook users. (Fleischmann) Although Yahoo! did acquire Tumblr, they still sit far behind with 19.1 million users. Tumblr has not made a huge impact in the social networking segment and the platform did not offer a high barrier to entry for competitors because its model can be easily replicated. Tumblr has a very small spread of demographics, 17 attracting mainly the youth and young adults and having absolutely no presence in the senior community. Facebook, who is the leader, is gaining much more share visits than any other social networking site, making it difficult for Yahoo! to compete. Another threat is government regulations. Yahoo! is subject to numerous laws, which can and often do, vary from state to state or country to country. There are different federal, state, and international laws regarding privacy and protection of user data that Yahoo! is required to comply with. Yahoo! has already established their methods and procedures on how to run their business, so when new laws are put into place, it forces them to adjust, which can lead to expensive future compliance costs. Changes in practices can also impact business and hamper user engagement, putting the company at a big risk. Examining Yahoo!’s SWOT analysis, we believe that although Yahoo! is competing in an industry with fierce competition, they still have a fighting chance and they have not completely lost the battle. As long as they capitalize on their strengths and take the opportunities presented to them, they can overpower many of the weaknesses they possess and challenge the threats that they encounter. While Yahoo! may have extreme difficulty surpassing their powerful peers, they still have plenty of room to grow and become a more ferocious contender in their industry. Appendix 5: The kind of corporate-level strategy that the company is pursuing. Corporate level strategies focus on how to maximize the long run profitability. Some of the corporate level strategies we have seen Yahoo! implement are acquisitions, horizontal integration 18 and vertical integration. In the early years of the growth, we saw a large number of acquisitions. Between its start and 2008, Yahoo! acquired or merged with over 50 companies. Today we are seeing horizontal integration with the example of Katie Couric being added to Yahoo!’s news team. Katie Couric became Yahoo!’s “Global Anchor” in 2014 with the strategic hope she’d expand Yahoo!’s market shares and build credibility to Yahoo! news. Mayer’s vertical integration strategy can be seen by the many brand extensions Yahoo! has experienced. This included Yahoo! Magazines, which derived from the acquisition of Tumblr. Looking at the home page we also see Yahoo! Advertising which ties all of the platforms together to make a more uniform and united feel for the user. Users are also able to now use the Smart TV app which links a user’s Yahoo! content to their own TV. Under Mayer’s leadership, Yahoo! has also implemented the strategy to hire talented people. Previously, Yahoo! hired more and more individuals to their team to develop ideas and products instead of ensuring employees provided knowledge capital. Morgan Stanley Research noted Yahoo!’s revenue per employee was $369,451 compared to Google’s $1,231,362. The median revenue was noted to be $539,717 which Yahoo! is still attempting to reach. Mayer is working to acquire talent as noted in Business Insider’s article from March 2014. The article stated when Mayer was hired in 2012, there were only 40 mobile engineers. Today Yahoo! has nearly 400 mobile engineers to address the vast opportunities in the mobile realm. The article continues to explain that 400 million users of Yahoo!’s 800 million users are mobile users. The impact from mobile is profound and clear. We have also noted that Yahoo! has used the strategy of strategic alliances. We see this in relation to their improved relationship with Microsoft and the Bing search engine. The relationship Yahoo! has with Google and Facebook are further examples of how Yahoo! is 19 attempting to implement this strategy. Instead of alienating themselves, Yahoo! is working to be a bigger part of the industry. On the negative side of the spectrum, Yahoo! announced the sale of their Alibaba stake. Alibaba has helped Yahoo!’s struggling revenue, so it’s uncertain how this sale will impact the bottom line. It should be noted with this sale that Yahoo! may face hefty tax penalties that could potentially have a negative impact on it’s already struggling finances. All of these shifts cause volatility for Yahoo! and its stock price, as well as, damaging the confidence of current and potential shareholders. The executive team needs to really stay focused on using their strategies to get traction in the market. Appendix 6: The nature of the company’s business-level strategy 20 Yahoo!’s business level strategy currently in effect under Marissa Mayer’s leadership is to gain market share. In 2014, Yahoo! appeared to hold the 2nd place position far behind Google in search engine providers. Per the Market Share Reporter, it stated Google had 75% of the market share while Yahoo! only had 12%. This is a huge disparity between the leading provider and Yahoo!. The discrepancy between Google and Yahoo! is even more pronounced when we review financial statements. As Figure 8 from Yahoo.finance.com shows, Yahoo!’s profit margin is less than 5% and Google enjoys a profit margin of nearly 23%. The return on assets for Google is healthy with over 8.5% compared to Yahoo!’s meager .04%. This number is concerning because it represents how effectively management is utilizing a company’s assets. It’s clear that Yahoo! is underperforming and the assets Yahoo! holds are not being used to their full potential. It was believed once Mayer joined the leadership role, Yahoo! would Figure 8- Source: Yahoo.finance.com experience a great turn around. In contrast, it appears Yahoo! still struggles to find its new identity in the market. To offset the expenses Yahoo! will need to determine how to utilize their assets more effectively and increase market share to regain strength and improve the balance sheet. To do this, Yahoo! is redesigning the company’s website, improving content, and focusing on attracting a younger generation of users through acquisitions such as Tumblr and Flickr. Yahoo!’s leaders 21 believe that the more Yahoo! is able to integrate into the users’ lives, they will be able to grow and have more leverage in the market. How to implement this strategy effectively is not always very clear. We do know that Yahoo! will need to hire talent that can bring knowledge capital to the table. The business needs to keep costs down by minimizing the number of employees needed and keeping their overhead lean. Keeping costs down will lower prices to potential advertisers which is a low cost strategy Yahoo! is working to implement. This strategy is in place to differentiate Yahoo! and generate revenue. Unfortunately, competitors such as Google are leading in advertising money being generated by the service they provide as well as a low cost to the advertisers. Appendix 7: The company's structure and control systems and how they match its strategy 22 It’s easy to see the drastic decline in Yahoo!’s success from its inception. Today we observe Yahoo! struggling with their identity and to overcome mistakes of the past. Previous strategies of acquiring businesses ended up being very costly, producing little to no change in the market share Yahoo! achieved. Realistically we are seeing Yahoo! fighting to come back to relevance against the leading competitors Google, Microsoft, and Facebook. Note Google is the winner for the best place to work per Fortune.com in 2015. Yahoo! hasn’t been on this list since 2008. How much does employee satisfaction play into the success of a company? The culture must play a key role in employee satisfaction so it’s important to discuss a notable shift in culture that occurred after Mayer took the helm. The industry was in shock when Mayer revoked the ability for employees to work from home and demanded employees come into the office. She stated in an interview that while individuals work better alone, they innovate better together. This mindset was her basis on revising the work from home norm. It has been noted that Yahoo! has struggled with cohesive teams and top notch work so Mayer had the stock price removed from the intranet homepage to potentially lessen the impacts from a declining stock price. She has also added weekly leadership meetings to improve morale and teamwork. (Moulton) There were other changes as well, including Mayer’s personal touch on hiring. Every potential hire is reviewed by Mayer herself, which speaks true to the strategy that Yahoo! needs to hire talented people versus just hiring more people. This shift in hiring allowed the company to quickly gain control and set the tone for employee expectations. Mayer has also taken some of the lessons learned from the success of Google and began to offer free food to employees. To improve employee satisfaction, employee benefits are 23 competitive and per Yahoo!’s website, include access to a health club, education reimbursement, and medical insurance for employees’ dependent children and parents as well. Yahoo! also provides free transport between locations so employees are able to collaborate. This perk is helping to support the teamwork ideology Mayer is working hard to instill in the culture. It’s important Yahoo! continue to realign its business model and the changes noted above are steps in the right direction. Yahoo!’s shifts in strategic alliances with competitors reinforces their business model of collaboration. Yahoo!’s corporate website clearly states how they’d like the company to be seen: “Yahoo is focused on making the world’s daily habits inspiring and entertaining – whether you’re searching the web, emailing friends, sharing photos with family, or simply checking the weather, sports scores or stock quotes.” Mayer has stated that she wants users to reach out through Yahoo! as a subconscious habit. Building that habit will reinforce brand loyalty and eventually improve revenue. Appendix 8: Recommendations 24 Brand loyalty is a key aspect of any business’ success. Yahoo! needs to continue to produce a product consumers are eager and excited to be a part of. We believe Yahoo! needs to build a stronger brand image which can be accomplished partially by Marissa Mayer’s strategy to create a clear vision for Yahoo!. When employees and consumers know what products Yahoo! provides, the confidence increases and the bottom line typically sees a positive result. Building a mobile sector in Yahoo!’s business is vital to their improvement. It is key for Yahoo! to begin generating a profit and since they are not a first mover in this realm, they need to ensure they execute their plans effectively. As previously stated, the mobile engineering staff has grown since Mayer took over, so it’s time to turn those assets into profits through innovation. Improving saturation in the mobile sector is sure to positively impact the bottom line, if executives can control expenses. We’d also recommend Yahoo! continue to build strategic alliances with other businesses. Alliances will grant Yahoo! key aspects they need to be successful without having to incur the expense to acquire businesses for a few potentially profitable applications. Alliances will allow the business to focus on tactical acquisitions which can improve their market position by improving revenue, adding talented works, and building advertisements. It’s vital Yahoo! work on developing more effective advertisements and cut overhead as much as possible. It’s important to note overhead includes, but isn’t solely headcount, so other expenditures need to be reviewed for their real value. Yahoo! needs to continue to be innovative with advertisement placement. Currently native advertisements, which is the blending of an advertisement with the content is a successful concept. It’s also a creative way to beat Google’s advertisement placements. 25 Case Question 1: Using Porter’s five?forces model, what does Yahoo!’s competitive structure and industry look like? What are the implications of this structure for the long? run profitability of Yahoo! in the market? In order to get a better perspective on Yahoo!, we must look at its structure and industry through Porter’s five-forces model. The five forces are broken out below: Threat of New Entrants: In this portion of Porter’s five-forces model we will examine how attractive this industry is for new firms to join. When there are new entrants into the industry it’s expected profitability will decrease. Current players want to block new firms from joining to maintain their own profitability. The blocks are referred to as barriers to entry and businesses currently in the industry want this to be high. Yahoo! is in a relatively good position because the threat of new entrants is low. The cost for a new company to join the ranks effectively will be extremely costly so that influences potential new players to opt for other more viable business ventures. Yahoo! is part of the search engine industry, which is seen as a maturing market, meaning the market is saturated, leaving limited market share to acquire. This segment does not appear to be a lucrative proposal to new entrants so they decide to find more profitable segments. Determining the barrier of entry, we need to understand many aspects of the industry. It’s stated that the most attractive business segments are segments with high barriers of entry, limiting who is able to join and low exit barriers. Having low exit barriers allows a company to easily leave the segment. Google and Microsoft have dominated the market through the advanced improvements of their search engines, increased market share and utilizing their assets effectively. Google is touted as delivering optimal search results according to “The Ultimate 26 Google Algorithm Cheat Sheet” by Neil Patel. PageRank, who ranks search engine results, claims this superior result is linked to Google having the best algorithm. Threats of substitute products or services: There is a low threat of substitute products or services in the search engine segment. Search engines, to date, are the quickest and most efficient medium to retrieve information. Substitute products or services could include bulletin boards but they are cumbersome for the user who will have to sift through the data to obtain the information they are hoping to find. Bulletin boards would therefore be considered a substandard product in comparison to leading search engine services. Switching costs is one way companies like Yahoo! and Google can prevent users from moving to other services. This is why Yahoo! implemented customized pages for their customer. Once a user has invested the time into customizing their space, they are less likely to move because they will lose all of their efforts already invested. It’s difficult to substitute what the current search engine providers have to offer, all of which lower the threat of substitutes. Bargaining Power of Suppliers: Knowledge is the commodity being supplied in this segment, so people holding the knowledge are considered the suppliers. Currently the bargaining power of suppliers is low to moderate. In this industry, software engineers and programmers (suppliers) are growing at a high rate. According to the Bureau of Labor Statistics, there will be an increase of 222,600 employees from 2012 to 2022. As of 2012, the amount of software engineers stood at 1,018,000. For programmers, there will be an increase of 28,400 from 2012 to 2022 and there are 343,7000 employees as of 2012. Essentially, these workers will be easy to find and the most talented workers will receive the best positions at the best companies, thereby making it less difficult to 27 find talented and skilled workers. However, if we perceive this as the business-to-business aspect, the power is moderate. Bargaining Power of Buyers: Search engines generate the majority of their revenue through advertisements. Search engines with the most traffic will receive business opportunities to sell advertisements for companies, generating profit. The bargaining power of buyers, which in this case are companies and customer’s seeking services is moderate. Companies such as Google, who have healthy profit margins, are able to decide if they want to sell space to buyers (advertising companies) or not. Google is granted the flexibility to decided what products they want to have connected to their search engine. This is an example of a lower bargaining power of buyers. Competitive Rivalry: It’s important to look at the competition currently in the marketplace and determine if it’s highly competitive, with a limited number of key players, or not very competitive, with many players involved. The search engine portion of Yahoo!’s industry is high. According to the Michael Porter, if there is more spending on non-price competitive strategies, or both, the intensity of competitive rivalry is high. (Hill and Jones 53) Currently, Google and Yahoo! are busy developing non-price competitive strategies. For example, Google has purchased YouTube and Yahoo! has purchased Tumblr. These websites come at no cost to the competitor and were purchased to enhance Google and Yahoo!’s advertising revenue. These acquisitions diversified their portfolios and differentiated the respective companies. After reviewing Porter’s five forces we can conclude that these factors in regards to the long-run profitability of Yahoo! is concerning. While competitors such as Google have a lower 28 bargaining power of customers, they are allowing to maintain more control of what they sell advertising space for and this has Yahoo! struggling to survive. The survival tactics and recovery strategies Yahoo! is implementing still leave them susceptible to failure. While Google ranks high in employee satisfaction, they have a high competitive potential workforce (suppliers) wanting to join their ranks. Many of the workforce are from elite colleges, such as Stanford, and this causes a highly competitive environment for people who want to joint Google because of what it has to offer. Yahoo! has an uphill struggle to ensure their suppliers (workforce) want to be employed by them. An example of this can be seen in the acquisition of Tumblr. Most people believe Yahoo! paid far over market value for the company to gain David Karp’s talents. David Karp in this instance is the supplier and he had a very high bargaining power. Long term issues for Yahoo! with regards to the bargaining power of buyers is high compared to companies like Google. Yahoo! struggles to make a profit and does not have the luxury to be picky in which products they advertise to their consumers. With the limited revenue, the bargaining power of buyers is higher because they are able to negotiate Yahoo! to a lower cost. Yahoo! is situated in a highly competitive industry with high barriers entry so that does allow Yahoo! some breathing room for the long term. Having these two facets help control rising substitutes that allow Yahoo! to potentially maintain their current market share. Yahoo! hopes to regain a portion of the market share they have lost to other businesses in the long term, but only time will tell if the strategies Mayer has in place can achieve those goals. 29 Case Question 2: Has Yahoo! permanently lost the battle to Google? Can Yahoo! reinvent itself? What strategies would you recommend? The disparity between Google and Yahoo! is tremendous. While it appears to be hopeless, we’d like to believe there is always a chance for the underdog. Google is currently experiencing a lead of 69.24% in the global search engine market share while Yahoo! shows a meager 9.19% in October. Since breaking the news that Yahoo! is looking to sell off profitable business units as well as 15% of their stake in Alibaba, the gap between Google and Yahoo! appears only to be intensifying in distance. Yahoo! still has a chance of succeeding, but it must take the proper steps moving forward. They must effectively apply the following strategies: form strategic alliances, make tactical acquisitions, develop more effective advertisements than Google, and reduce expenditures. Strategic alliances play a big role in Yahoo!’s transformation to success. They are currently in a new contract with Microsoft which offers some hope for a turn around. According to the article “It Looks as If Marissa Mayer Drove a Pretty Hard Bargain with Microsoft” by Matt Rosof, the deal enables Yahoo! to keep 93% of the gross revenue produced per Bing ad that Yahoo! chooses to run. Yahoo! can use Bing’s search results without Microsoft’s ad listings next to them. If/when this occurs, Yahoo! incurs a fee for the search result and will be granted the entire revenue share from the ad. Included in this deal, the conditions stipulate that Yahoo! could terminate the deal after October 1, 2015. On May 1st, a renegotiated contract required Yahoo!’s mandatory use of Microsoft’s search ads and web results. Only 51% of search ads and web results were given to Microsoft, meaning that the remaining 49% could be provided by Yahoo!, 30 or outsourced to Google (or any other company). On October 20, 2015, Yahoo! entered into a contract with Google, more specifically, a unit of Alphabet Inc. In this deal Google will provide Yahoo! with search ads for its search results. In return, Yahoo! must pay an undisclosed amount of revenue produced by that ad. Arrangements like this assist Yahoo!’s search engine and improve its revenue stream by harvesting traffic. These alliances help enhance its relations with its competitors and also act as a mutual aid. Marissa Mayer must continue to hunt for more revenue generating opportunities such as these in order to sustain the company’s health. The next strategy mentioned earlier is acquisitions. These purchases can help in three ways: improve the company’s talent pool, increase revenue production, or offer diversification. Acquisitions can also be a combination of each. To not fall into the same mistakes of the past, Yahoo! must be sure to avoid acquisition pitfalls. In the article “Pros and Cons of Business Acquisitions” by Richard Bloch, acquisition pitfalls are discussed. The pitfalls, provided by Bloch, are the following: conflict of corporate culture interest between purchasing company and purchased company, employee fear of removal from the company, and debt accrued from excessive purchasing. There is a possibility that Yahoo! could capture a company with a conflicting corporate culture. If this is the case, there may be a loss of skilled employees that prefer a certain culture. As a result, the acquisition may become a waste of expenditure. Another result from an acquisition pitfall is the employee fear of layoffs. Working in fear is unhealthy to the employee and is detrimental to the company’s performance. Also, when a company acquires another company, debt may accrue from excessive acquisitions. Marissa Mayer has sent Yahoo! on a startup shopping spree. Acquiring companies may be a smart move, but it costs more than its purchasing price. As there are more businesses under Yahoo!, there are more employees to 31 pay and other costs to cover. If the calculations are incorrect, Yahoo!’s operating income could collapse due to its failure to slow down purchasing and calculate its expenditures. Another move is to enhance their advertisements relative to Google. Although this may remove Google’s involvement with Yahoo!, Yahoo! might want to consider enhancing its advertisements. This move will put Yahoo! in direct competition with Google’s ads. Yahoo! has developed an advertising service called Gemini, which empowers advertisers by developing marketing content on mobile and native applications for mobile and tablet devices. According to “Yahoo! Gemini: Complete Guide to Yahoo!’s Mobile & Native Advertising” by Miranda Miller, ads are blended with the editorial content in the native formatted websites. This makes the advertisement much more imposed than others, thereby making it difficult to miss for the viewer. According to research by Sharethrough, in the article provided by Miller, a company that develops native advertising software found that 23% of viewers were more likely to look at native ads than banner ads. Native ads were viewed 53% more than banner ads. Yahoo! has a tool that can be very helpful in the future if improved upon properly. Lastly, reducing expenditures is vital move for Yahoo!. According to Professor Larry Gee, labor is not the only expenditure for business, but is the biggest cost to a company, so reducing the workforce can have a positive impact on the bottom line. Yahoo! produces less revenue per employee than Google. Google yields 3.33x more revenue per employee than Yahoo!, which is a huge disparity. If Yahoo! desires to compete against Google and regain the lead, they must find a way to produce more revenue with fewer employees. Since Mayer is focused on hiring better talent and the company prefers to keep their employees, they must find a solution to optimize their workforce in order to yield more revenue. Yahoo! is work in progress, which means their business model is too. 32 Case Question 3: What steps can Yahoo! make to realign its business model? If Yahoo! opts to keep their core business units and sell less of their stake in the Alibaba Group, we believe Yahoo! can continue taking steps to realign its business model. Their business model is to provide content through vertical integration (the different free applications provided by Yahoo! such as news, games, fantasy sports, dating, etc.), web search, and email at no cost to the consumer. In addition, the consumer is granted access to self-customization of their email and web portal pages. In return, Yahoo! receives traffic. This traffic becomes attractive to marketers resulting in companies seeking to place marketing content with Yahoo!, generating much needed revenue. Essentially, Yahoo! generates revenue by gaining traffic created by the many users of their website. Yahoo!’s sole existence is funded by the ads, which are brought in by high volumes of consumer traffic. The way Yahoo! is attempting to achieve increased traffic is through their strategic alliance with Microsoft and Google, reducing their workforce, developing a stronger corporate culture, improving downward communication, improving user experience, finding hosts for advertisements, and improving the mobile experience. The alliances Yahoo! has formed with Microsoft and Google can only help the company generate revenue. The reduction of costly expenditures is imperative and a stronger culture can help improve collaboration and cohesion within the company. To improve cohesion Yahoo! needs to focus on the top-down communication. Downward communication of company strategy has been an issue for employees. In a Harvard Business Review article, “When CEOs Talk Strategy, Is Anyone Listening,” a survey conducted at 20 major Australian corporations showed that 71% of employees did not understand their employer’s strategy. Without knowing the strategy, employees may potentially move off target, costing the company hundreds of thousands of 33 dollars. Although this study was conducted outside of the United States where cultures differ, it sheds light on the possibility that downward communication at a corporation is faulty today. Marissa has made it a point to communicate so that her employees and consumers understand the company’s vision. In a plethora of interviews, Mayer can be heard repeating the same words, driving the company’s ideology home. This was her method of instilling the company vision and plan and resulted in shaping employee's’ identity with the company. Another way Yahoo! is realigning its business model is through their Graphic User Interface. The reason for traffic (amount of visitors at a website), which helps advertisement placement demand, is the web portal’s interface. Yahoo!’s platform allows users to customize their experience by allowing them to highlight the verticals they prefer to prioritize on their homepage. Another is applying the MAYA principle, which aims to reduce anxiety by gradually (Schneider) improving the learning curve of users to the new software. These two attributes are helping to attract new customers and are what has assisted in maintaining its 800 million users Yahoo! experiences today. Yahoo!’s GUI has its downfalls. There are too many verticals that make the process more complicated than it should be. This needs to be improved in order to realign its business model, which is driven by growing traffic. The three principles for its interface are simplicity, efficiency, and entertaining. Having a complicated process is counter to this philosophy. On the contrary, Google’s homepage achieves all these objectives well. Yahoo! must make the same effort in order to increase its consumer base. Although Yahoo! has a web portal to host advertisements, they must also locate advertisement spots for their acquired companies. The acquisition of companies such as Flickr and Tumblr have paved the way for this. On Flickr, ads are posted in users’ albums. In Tumblr, sponsored content is layered in between other posts. The 34 above suggestions are lucrative ways Yahoo! can generate revenue. However, it has not been effective just yet. This means that the company must either modify their ad placement or find other hosts where the ads yield moderate to high revenues. Finding hosts for advertisement is one way Yahoo! is realigning its business models. Another way is in how it deals with its mobile experience. The mobile market will be growing to $40 billion in 2019, and Yahoo! is attempting to capitalize on this growth. They are implementing two different methods of advertisements for the mobile and tablet users. They have downloadable applications for iTunes and Google Play to increase accessibility for the user. Unfortunately, Yahoo! faces a problem concerning their application. It needs to work on its iOS version of the “Yahoo! – News, Finance, Sports & More” which has received bad reviews. It has had ten ratings with a ranking of one and a half stars out of five. If Yahoo! wants to attract more mobile customers, they must have high quality applications to build market shares. Yahoo!’s other applications have four or more out of five stars when reviewing both app stores. Acquiring more businesses is another way the company is able to realign its model. When Yahoo! makes an acquisition they must be sure to be tactical because purchasing the proper companies can lead to three positive outcomes: increased talent pool, enlarged revenue streams, and diversification of a company’s portfolio. Having more skilled employees helps with productivity and innovation and improves various aspects of the company. For example, in the article “Marissa Mayer Spends $640 Million To Buy A Video Advertising Company” by Matt Rosoff, Yahoo! purchased Brightroll, a video advertising company that assisted Tumblr’s improvement of video ads. However, an increase in workforce is contradictory to improving revenue per employee. In this case, Yahoo! might have to select the most talented workers and release the others. The situation is quite complex because the psychology of worker morale may 35 be negatively affected such that they work in fear, or create tension within the workplace. This is a pitfall Yahoo! must avoid. Moving forward, some acquisitions may result in cash cows. This means that the asset produces high revenue growth. Tumblr is currently a potential cash cow. According to the article “Tumblr Plans To Turn Into A $100 Million Business By Taking On TV and Newspapers” by Lara O’Reilly, the company publicly stated that they expect Tumblr to gross $100 million in revenue in 2015. Another outcome provided by acquisitions is the expansion of a company. For example, Marissa Mayer became a first-mover in the mobile industry when she announced that Yahoo! was going mobile. However, she lacked a mobile hardware and software division as well as a web browser. This made her path to success difficult. To move forward, she acquired companies such as Aviate and Flurry that would help with the mobile aspect of its business. In doing so, she expanded Yahoo! by diversifying its products and services. Marissa Mayer is nothing short of an underdog in her industry. However, she has a business strategy that aims to turn the tides in hopes to return Yahoo! to its once dominant era. 36 Case Question 4: What is Marissa Mayer's business strategy? How does it tie into Porter's Five?forces in Question 1. Explain. Two of Marissa Mayer’s strategies include gaining market share and reducing cost. In review, Yahoo! is mostly affected by bargaining power of buyers (the companies seeking advertisement space), and intensity of competitive rivalry. Advertisers have options about who they choose to do business with, making the strategy to gain market share difficult. Yahoo! must be able to provide a differentiated service to the customer to draw them to their company. Yahoo!’s strategy has been to improve consumer traffic to their websites, persuading potential advertisers that their message will reach a broader audience, thus generating Yahoo! revenue. In terms of intensity of competitive rivalry, Yahoo! is in dire need of an effective course of action to stay relevant. They must find a way to differentiate themselves from their competitors and build a solid identity for the struggling company. Mayer’s strategy in this area piggy backs on the same strategy to reduce the power of buyers. Yahoo! focuses on increasing traffic, making their advertising space more desired. In the mobile realm, Yahoo! has developed Gemini, an advertising platform, which attempts to improve the marketing content and enhance the mobile user experience. This offering is different from competitors because it is brought about by the native advertisement. With the current news that Yahoo! is looking to sell off core business units, we are unclear if improving market share is even possible moving forward. We believed Marissa Mayer was doing what she could to improve Yahoo!’s current state but the recent announcements are concerning. Selling off business units that are profitable can lead to the end of Yahoo!. 37 Mayer’s previous strategies to turnaround Yahoo! can be seen with the company’s investment in Katie Couric, advertisements, acquisitions, and alliances which all seemed promising and full of potential. Most of these tactical decisions seem to have fallen flat, not reducing the power of suppliers. It is clear Mayer’s strategy to develop a focused identity for the company can have a profound result. Being able to differentiate itself from competitors, is one of the few things Yahoo! can control. To build credibility the company brought a highly renowned journalist to their team, Katie Couric. On Yahoo!’s homepage, we can see that news is the highlight of the web portal, placed in the center position of the webpage, making it impossible to miss. It’s believed Katie Couric will generate traffic by developing original content, which the competitors don’t currently offer. To further address the competitive rivalry Mayer is acquiring companies to improve Yahoo!’s presence. Through acquisitions, Yahoo! will have access to more talented employees, potential revenue streams, and expand the company’s portfolio. Mayer has also formed alliances with its competitors in order to improve revenue growth and address the high level of competition. With all the changes Yahoo! has undergone and is in the middle of today, we can only wait and watch to see whether Yahoo! improves. 38 Conclusion: Yahoo! has been through many ups and downs since its inception. Within 72 hours of this document being due, Yahoo! announced startling and concerning news. Per the New York Times it appears Yahoo! has begun to discuss selling off core business units. Some of these units would include the most profitable sectors, pay-per-click advertising, and their email services. If Yahoo! was to move in this direction, it appears the company is beginning to disassemble itself. It is sure to be the end of Yahoo! if it is left with only its search engine technology. The search engine sector for Yahoo! has declined heavily, it is not profitable, and has always been dependent on advertising revenue to be profitable. In addition to the potential sale of Yahoo!’s core businesses being sold, Yahoo! is also discussing plans to sell 15% stake in the Alibaba Group. The sale of these stakes will generate cash flow but the taxes are said to be hefty, making the sale potentially ineffective. Tactical strategies such as these have been Yahoo!’s Achilles heel for many years. Shareholders had hoped Marissa Mayer would be able to turn the business around. Four years after taking over as CEO, many shareholders are seeking to remove Mayer, citing that Yahoo! has not experienced the turnaround they expected. It was stated Yahoo! has not introduced any “break through products”, but they do acknowledge Mayer was able to stop the major decline Yahoo! had been experiencing. The environment they are in is extremely dynamic and highly competitive. Yahoo! may have enjoyed the first-mover advantage in the beginning of its run, but those days are gone. It’s vital Marissa Mayer continue to implement strategies that recreate Yahoo!’s identity and improves their market share. We don’t believe selling off profitable business units improves market share. Strategic alliances are key to increasing revenue and rebuilding the company. 39 Acquisitions need to be limited to truly necessary purchases and acquisition pitfalls need to be avoided at all costs. Both of the most recent acquisitions, Tumblr and Polyvore, have not shown their real value to Yahoo!, damaging consumer confidence. With Yahoo! losing money every quarter, it is only a matter of time before Yahoo! will be acquired by a larger company and be forced to sell off business units to survive, or completely go belly up. Innovation will be what makes a difference in their future. 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Web 10 Nov 2015. . they do not break out in the environment and instead accumulate in the human body over a long period of time.4 3M was claimed to have known about the health dangers of PFAS chemicals since the 1950s but actively concealed the information from consumers and the U.S. Environmental Protection Agency (EPA). After eight years, 3M settled the case with the state of Minnesota in 2018 for $850 million, which would be used to clean up the sites that have contaminated Minnesota residents. M again had to take a pretax fourth-quarter write-down of $214 million for the litigation in 2019. These lawsuits have damaged 3M's brand image in its customer's eyes. 4. SWOT Analysis Considering the internal strengths and weaknesses as well as external opportunities and threats that we identified above, 3M is overall doing quite well. Despite some weaknesses and the 5 4 “Con panies Deny Responsibility For Toxic 'Forever Chemicals' Contamination.” The Guardian, Guardian News and Me lia, 11 Sept. 2019, www.theguardian.com/us-news/2019/sep/11/pfas-toxic-forever-chemicals-hearing-3m-dupont-chemours. Commendatore, Cristina. “Corporations Pressed Over Alleged Efforts to Hide PFAS Health Risks.” Waste360, Sept. 2019, p. N.PAG. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bth&AN=138595882&site=bsi-live&scope=site. 6 Clough, Richard. “3M Tumbles Most Since April After Revealing Subpoena, Job Cuts.” Bloomberg. Com, Jan. 2020, . N.PAG. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bth&AN=141438365&site=bsi-live&scope=site. Chrome File Edit View History Bookmarks Profiles Tab Window Help 2 94% (4) Sat 3:33 PM lil Revel Syst X BH Sign U X + TQM Proje x TQM Proje x Bus 165 fin X SP21: BUS X BUS5-144 X _ BUS 189 P X S SOLUTION X 8 Untitled d x + < > ? drive.google.com/drive/u/0/folders/1UZEWCFV3hnr_c_ZKYI_sZwGhOfKOQRIG h 220 A Drive Whole Foods Market: 2010 How to Grow in An Increasingly Competitive Market? Share 31 - New Patricia Harasta and Alan N. Hoffman Rotterdam School of Management, Erasmus University and Bentley University Files Name My Drive Shared with me 1 What are Recent las ???? what we ? Starred PDF Reflecting back over his three decades of experience in the grocery business, John Mackey smiled to him- self over his previous successes. His entrepreneurial history began with a single store which he has now grown to the nation's leading natural food chain. Whole Foods is not just a food retailer but instead represents a healthy, socially responsible lifestyle that customers can identify with. The Company has differentiated itself from competitors by focus- ing on quality as excellence and innovation that al- lows them to charge a premium price for premium products. This strategy has formed their success over the last 30 years but like any success story there are limits to how far it can go before a new direction is needed so that it remains successful for the next 30 years. While proud of the past, John had concerns about the future direction Whole Foods should head. E Trash Storage py of BUS 189 TEXTBOOK... 1.4 GB of 15 GB used only for a limited selection, focusing entirely on veg- etarian foods. John joined forces with Craig Weller and Mark Skiles, founders of “Clarsville Natural Grocery” (founded in 1979), to create Whole Foods Market. This joint venture took place in Austin, Texas in 1980 resulting in a new company, a single natural food market with a staff of nineteen. In addition to the supermarkets, Whole Foods owns and operates several subsidiaries. Allegro Cof- fee Company was formed in 1977 and purchased by Whole Foods Market in 1997 now acting as their coffee roasting and distribution center. Pigeon Cove is Whole Foods seafood processing facility, which was founded in 1985 and known as M & S Seafood until 1990. Whole Foods purchased Pigeon Cove in 1996, located in Gloucester, MA. The Company is now the only supermarket to own and operate a waterfront seafood facility. The last two subsidiar- ies are Produce Field Inspection Office and Select Fish, which is Whole Foods West Coast seafood pro- cessing facility acquired in 2003. In addition to the above, the Company has eight distribution centers, seven regional bake houses and four commissaries. “Whole Foods Market remains uniquely mission driven: The Company is highly selective about what they sell, dedicated to stringent quality standards, and committed to sustainable agriculture. They be- lieve in a virtuous circle entwining the food chain, human beings and Mother Earth: each is reliant upon the others through a beautiful and delicate symbio- sis.” The message of preservation and sustainability are followed while providing high quality good to custiers and high profits to investors. Jing Gao Buy storage Company Background 3M Case Study #27 The Second Century US 189 - Prof. Larry Gee Whole Foods carries both natural and organic food offering customers a wide variety of products. “Natu- ral” refers to food that is free of growth hormones or antibiotics, where “certificated organic” food con- forms to the standards, as defined by the U.S. Depart- ment of Agriculture (USDA) in October 2002. Whole Foods Market® is the world's leading retailer of natu- ral and organic foods, with 193 stores in 31 states and Canada and the United Kingdom. John Mackey, cur- rent president and cofounder of Whole Foods, opened “Safer Way” natural grocery store in 1978. The store had limited success as it was a Page je 10559onal965ing Team #6 - The A Team Hoang, Kenny #3819 py of Team_6_3M_Case_27 71 12 MAY 5 8 A Chrome File Edit View History Bookmarks Profiles Tab Window Help 2 90% Sat 3:56 PM lil Revel Syst X BH Sign U X + TQM Proje x TQM Proje x Bus 165 fin X Assignmer x E BUS5-144 X BUS 189 P X S View Quesx Untitled do x | + < > ? drive.google.com/drive/u/0/folders/1UZEWCFV3hnr_c_ZKYI_sZwGhOfKOQRIG h AD 304 A Drive Shared E 31 - New Files Name My Drive Shared with me A com BSWO Recent las ??? h? ??m??n What we ? Starred PDF 4 The People will better understand that all actions have repercussions and that planning and foresight cou- pled with hard work and flexibility can overcome almost any problem encountered. It will be a world that values education and a free exchange of ideas by an informed citizenry; where people are encouraged to discover, nurture, and share their life's passions.” While Whole Foods recognizes it is only a super- market, they are working toward fulfilling their vi- sion within the context of their industry. In addition to leading by example, they strive to conduct busi- ness in a manner consistent with their mission and vision. By offering minimally processed, high quality food, engaging in ethical business practices and pro- viding a motivational, respectful work environment, the Company believes they are on the path to a sus- tainable future. Whole Foods incorporate the best practices of each location back into the chain. This can be seen in the Company's store product expansion from dry goods to perishable produce, including meats, fish and prepared foods. The lessons learned at one location are absorbed by all, enabling the chain to maximize effectiveness and efficiency while offering a product line customers love. Whole Foods carries only natural and organic products. The best tasting and most nutritious food available is found in its purest state—unadulterated by artificial additives, sweeteners, colorings, and preservatives. Whole Foods continually improves customer of- ferings, catering to its specific locations. Unlike busi- ness models for traditional grocery stores, Whole Foods products differ by geographic regions and lo- cal farm specialties. DIDE E Trash Whole Foods has grown over the years through mergers, acquisitions and new store openings. The $565 million acquisition of its lead competitor, Wild Oats, in 2007 firmly set Whole Foods as the leader in natural and organic food market and added 70 new stores. The Federal Trade Commission (FTC) focused their attention on the merger on antitrust grounds. The dispute was settled in 2009, with Whole Foods closing 32 Wild Oats stores and agreed to selling the Wild Oats Markets brand. The organic grocer's stock plunged in 2008 as its sales staggered. Later that year the private equity firm Green Equity Investors invested $425 million in Whole Foods, thereby acquiring about a 17% stake in the chain. For the first time in its 29-year history, Whole Foods reported negative same-store sales in the quarter ended December 2008 as traffic in its stores fell. Today Whole Foods is listed in the S&P 500 and ranked 284th in the Fortune 500. It is the world's leading natural and organic foods supermarket and is America's first national certified organic grocer. In 2009, it had sales of $8 billion and 289 stores; 273 stores in 38 states of the US and the District of Columbia, 6 stores in Canada, and 5 stores in the UK. The Company has grown from 19 original em- ployees to more than 53,500 team members.1 While the majority of Whole Foods locations are in the U.S., European expansion provides enormous potential growth due to the large population and it holds “a more sophisticated organic-foods market than the U.S. in terms of suppliers and acceptance by the public.” Whole Foods targets their locations spe- cifically by an area's demographics. The Company targets locations where 40% or more of the residents have a college degree as they are more likely to be aware of nutritional issues. G. OSAT Storage E py of BUS 189 TEXTBOOK... 1.4 GB of 15 GB used Buy storage IBM ?? Case Study #27 The Second Century By US 189 - Prof. Larry Gee Team #6 - The A Team Hoang, Kenny #3819 Employee & Customer Relations Whole Foods encourages a team based environment allowing each store to make independent decisions regarding its operations. Teams consist of up to eleven employees and a team leader. The team lead- ers typically head up one department or another. py of Team_6_3M_Case_27 Whole Foods Market's Philosophy Their corporate Website defines the company philos- 11. TV71 M 12 70 201 71 12 MAY 5 8 ... n A TA Chrome File Edit View History Bookmarks Profiles Tab Window Help 90% Sat 3:56 PM lil Revel Syst X BH Sign U X + TQM Proje x TQM Proje x Bus 165 fin X Assignmer x E BUS5-144 X BUS 189 P X S View Quesx Untitled do x | + < > ? drive.google.com/drive/u/0/folders/1UZEWCFV3hnr_c_ZKYI_sZwGhOfKOQRIG h 310 A Drive Whole Foods Market's Philosophy Shared E 31 - New Whole Foods encourages a team based environment allowing each store to make independent decisions regarding its operations. Teams consist of up to eleven employees and a team leader. The team lead- ers typically head up one department or another. Each store employs anywhere from 72 to 391 team members. The manager is referred to as the “store team leader.” The “store team leader” is compen- sated by an Economic Value Added (EVA) bonus and is also eligible to receive stock options. Whole Foods tries to instill a sense of purpose among its employees and has been named for 13 con- secutive years as one of the “100 Best Companies to Files Their corporate Website defines the company philos- ophy as follows, “Whole Foods Market's vision of a sustainable future means our children and grand- children will be living in a world that values human creativity, diversity, and individual choice. Businesses will harness human and material resources without devaluing the integrity of the individual or the plan- et's ecosystems. Companies, governments, and in- stitutions will be held accountable for their actions. Name My Drive Shared with me A com ES What are Recent als re compan ? Starred What we Desimene er Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. PDF The pe ΠΕΙ E Trash Ba Case 2: Whole Foods Market: 2010 How to Grow in An Increasingly Competitive Market? C29 Storage py of BUS 189 TEXTBOOK... 1.4 GB of 15 GB used Jing Gao Buy storage Work For” in America by Fortune magazine. In em- ployee surveys, 90% of its team members stated that they always or frequently enjoy their job. The company strives to take care of their cus- tomers, realizing they are the “lifeblood of our busi- ness,” and the two are “interdependent on each other.” Whole Foods' primary objective goes beyond 100% customer satisfaction with the goal to “de- light” customers in every interaction. 3M Case Study #27 The Second Century competing in the supermarket industry include Tar- get, Sam's Club and Costco. All of these retailers of- fer grocery products, generally at a lower price than what one would find at Whole Foods. Another of Whole Foods' key competitors is Los Angeles based Trader Joe's, a premium natural and organic food market. By expanding its presence and product offerings while maintaining high quality at low prices, Trade Joe's has found its competitive niche. It has 215 stores, primarily on the west and east coasts of the U.S., offering upscale grocery fare such as health foods, prepared meals, organic pro- duce and nutritional supplements. A low cost struc- ture allows Trader Joe's to offer competitive prices while still maintaining its margins. Trader Joe's stores have no service department and average just 10,000 square feet in store size. ditio ti competition has arisen from grocery stores, such as Stop ‘N Shop and Shaw's, which now incarnarate natural foods sections in their conven US 189 - Prof. Larry Gee Competitive Environment Team #6 - The A Team Hoang, Kenny #3819 py of Team_6_3M_Case_27 At the time of Whole Foods’ inception, there was al- most no competition with less than six other natural food stores in the U.S. Today, the organic foods in- dustry is growing and Whole Foods' finds itself com- peting hard to maintain its eli Page se561 / 965 In the early- to mid-2000s, its biggest competitor . 71 12 MAY 5 O ... 8 n A TA Chrome File Edit View History Bookmarks Profiles Tab Window Help 2 90% Sat 3:57 PM lil Revel Syst X BH Sign U X + TQM Proje x TQM Proje x Bus 165 fin X Assignmer x E BUS5-144 X _ BUS 189 P x S View Ques X Untitled do x + < > ? drive.google.com/drive/u/0/folders/1UZEWCFV3hnr_c_ZKYI_sZwGhOfKOQRIG h AD 315 A Drive Share 31 - New auce and nutritional supplements. A 10W cost struc- ture allows Trader Joe's to offer competitive prices while still maintaining its margins. Trader Joe's stores have no service department and average just 10,000 square feet in store size. Additional competition has arisen from grocery stores, such as Stop ‘N Shop and Shaw's, which now incorporate natural foods sections in their conven- tional stores, placing them in direct competition with Whole Foods. Because larger grocery chains have more flexibility in their product offerings, they are more likely to promote products through sales, a strategy Whole Foods rarely practices. Files Name My Drive Shared with me 1 What are Recent las ???? A Different Shopping Experience what we ? Starred PDF E Trash At the time of Whole Foods' inception, there was al- most no competition with less than six other natural food stores in the U.S. Today, the organic foods in- dustry is growing and Whole Foods' finds itself com- peting hard to maintain its elite presence. In the early- to mid-2000s, its biggest competitor was Wild Oats. In 2007, Whole Foods put a bid on Wild Oats for $670 million? and drew an anti-trust in- vestigation from the FTC. The FTC felt that a merger of the two premium natural and organic supermar- kets would create a monopoly situation, ultimately harming consumers. It was found that although Whole Foods and Wild Oats were the two key play- ers in the premium natural and organic food market, they are not insulated from competition from conven- tional grocery store chains. With the decision coming down in favor of Whole Foods and Wild Oats, the transaction was completed. Although this eliminated Whole Foods most direct competitor, they still faces stiff competition in the general grocery market. Whole Foods competes with all supermarkets. With more U.S. consumers focused on eating health- fully, environmental sustainability, and the green movement, the demand for organic and natural foods has increased. More traditional supermarkets are now introducing “lifestyle” stores and depart- ments to compete directly with Whole Foods. This can be seen in the Wild Harvest section of Shaw's, or the “Lifestyle” stores opened by conventional gro- cery chain Safeway. Whole Foods competitors now include big box and discount retailers who have made a foray into the grocery business. Currently, the U.S. largest gro- cer is Wal-Mart. Not only do they compete in the standard supermarket industry, but they have even begun offering natural and organic products its Supercenter stores. Other discount retailers now Storage py of BUS 189 TEXTBOOK... 1.4 GB of 15 GB used Jing Gao Buy storage The setup of the organic grocery store is a key com- ponent to Whole Foods' success. The store’s setup and its products are carefully researched to ensure that they are meeting the demands of the local com- munity. Locations are primarily in cities and are chosen for their large space and heavy foot traffic. According to Whole Foods' 10K, “approximately 88% of our existing stores are located in the top 50 statistical metropolitan areas.” The Company uses a specific formula to choose their store sites that is based upon several metrics, which include but are not limited to income levels, education, and popula- tion density. Upon entering a Whole Foods supermarket, it becomes clear that the Company attempts to sell the consun on the entire expe ence. Team mem bers (employees) are well trained and the stores themselves are immaculate. There are in-store chefs to help with recipes, wine tasting and food sam- pling. There are “Take Action food centers” where customers can access information on the issues that 3M Case Study #27 The Second Century US 189 - Prof. Larry Gee Team #6 - The A Team Hoang, Kenny #3819 py of Team_6_3M_Case_27 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. ] Team Contract 71 12 MAY 5 ( ... 8 A TA ws Chrome File Edit View History Bookmarks Profiles Tab Window Help 2 90% Sat 3:57 PM lil Revel Syst X BH Sign U X + TQM Proje x TQM Proje x Bus 165 fin X Assignmer x E BUS5-144 X 4 BUS 189 P x S View ( 4 X Untitled do x + < > ? drive.google.com/drive/u/0/folders/1UZEWCFV3hnr_c_ZKYI_sZwGhOfKOQRIG h AD 320 A Drive Shared Beyond the green movement, Whole Foods has been able to tap into a demographic that appreciates the "trendy” theme of organic foods and all natural products. Since the store is associated with a type of affluence, many customers shop there to show they fit into this category of upscale, educated, new age people. E 31 - New Files Name My Drive Shared with me The Economic Recession A com Recent ??? ???? ecompan What we ? Starred affect their food such as legislation and environmen- tal factors. Some stores offer extra services such as home delivery, cooking classes, massages and valet parking. Whole Foods goes out of their way to ap- peal to the above-average income earner. Whole Foods uses price as a marketing tool in a few select areas, as demonstrated by the 365 Whole Foods brand name products, priced less than similar organic products that are carried within the store. However, the Company does not use price to differ- entiate itself from competitors. Rather, Whole Foods focuses on quality and service as a means of standing out from the competition. Whole Foods spends much less than other super- markets on advertising, approximately 0.4% of total sales in the fiscal year 2009. They rely heavily on word-of-mouth advertising from their customers to help market themselves in the local community. They are also promoted in several health conscious maga- zines, and each store budgets for in-store advertising each fiscal year. Whole Foods also gains recognition via their charitable contributions and the awareness that they bring to the treatment of animals. The Company do- nates 5% of their after tax profits to not-for-profit charities. It is also very active in establishing systems to make sure that the animals used in their products are treated humanly. PDF 4. The par DIDE E Trash BE G. OSAT Storage E py of BUS 189 TEXTBOOK... 1.4 GB of 15 GB used Jingi Gao Buy storage The uncertainty of today's market is a threat to Whole Foods. The expenditure income is low and “all natural foods” are automatically deemed as expensive. Because of people being laid off, having their salaries cut, or simply not being able to find a job, they now have to be more selective when pur- chasing things. While Whole Foods has been able to maintain profitability, its questionable how long they will last if the recession continues or worsens. The reputation of organic products being costly may be enough to motivate people to not ever enter through the doors of Whole Foods. In California, the chain is frequently dubbed “Whole Paycheck.”4 However, the Company understood that it must change a few things if it were to survive the decrease in sales felt because customers were not willing to spend their money so easily. They have been working to correct this “pricey” image by expanding offerings of private label products through their “365 Every- day Value” and “365 Organic” product lines. Private label sales accounted for 11% of Whole Foods total sales in 2009, up from 10% in 2008. They have also instituted a policy that their 365 product lines must match prices of similar products at Trader Joe's." During the economic recession, restaurants had a severe impact. A survey conducted showed that adults were eating out 50% less than they were prior to the economic crash. Whole Foods saw this as opportunity to enter a new area of business, the premade meals sec- tor. They began selling premade dinners and lunches marketing towards those still on the go but interested IBM fa ben ?? Case Study #27 The Second Century The Green Movement US 189 - Prof. Larry Gee Team #6 - The A Team Hoang, Kenny #3819 Whole Foods exists in a time where customers equate going green and being environmentally friendly with enthusiasm and respect. In recent years, people be- gan to learn about food and the processes completed by many to produce it. Most of what they have dis- covered is disturbing. Whole Foods launched a na- tionwide effort to trigger awareness and action to remedy the problems facing the U.S. food system. It has decided to host 150 screenings of a 12 film series py of Team_6_3M_Case_27 71 12 MAY 5 ( ... 8 A TA Chrome File Edit View History Bookmarks Profiles Tab Window Help 2 89% Sat 3:57 PM lil Revel Syst X BH Sign U X + TQM Proje x TQM Proje x Bus 165 fin X Assignmer x E BUS5-144 X BUS 189 P X S View Ques x Untitled do x + < > ? h AD 326 A Drive drive.google.com/drive/u/0/folders/1UZEWCFV3hnr_c_ZKYI_sZwGhOfKOQRIG take charge of their food choices. Jumping on the band wagon of the “go green” movement, Whole Foods is trying to show its customers that it is dedi- cated to not only all natural foods, but to a green world and healthy people. As more and more people Shared become educated, the Company hopes to capitalize on them as new customers.3 sales. In November of 2008, the stock fell to $7 dollars. After the premade meals were created, the stock in- creased to $28 dollars September 2009.? If Whole Foods continues to come up with innovative ideas to still compete during a recession, there is much opportu- nity as the economy evolves and climbs the economic life cycle into recovery, expansion, and boom states. up E - New 31 Files Name My Drive Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if...