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TiVo Case Analysis
Warsaw Executive MBA, XI Edition
STRATEGIC MARKETING MANAGEMENT
WARSAW, DECEMBER 2005 WARSAW WARSAW SCHOOL OF ECONOMICS (SGH)
Author: Rafał Kowalczyk
Document: Owner: Subject:
SMM_TiVo_Case_Analysis_RafalKowalczyk, upd25.03.2006.doc Version: V1.3. Rafał Kowalczyk Strategic Marketing Management
Date: 2006/03/25 Status: Final Page 1 of 10
01.3. Document version history Current version: 1.03.01.2006 24.3. Hard copy version is actual only on print date.1 1.01. Version 1 1. Acceptation Function SMM Trainer Signature Document distribution This document has been delivered to the following persons: Signature Function SMM Trainer Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk.3 Date 21.doc Version: V1.2006.2006 22. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 2 of 10 .2006 25.2 1.Strategic Marketing Management / WEMBA11 Document History Document Localization This document is an electronic version. upd25.2006 Change description Chapter 1&2 Chapter 3 Chapter 4 Final Review Next version date: Final Version Acceptation This document has to be accepted by the following persons.01.
............................................................................................................... upd25.......10 Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk...................................... Sources............. Defining Problem/Decision Area.........................................9 6............ Recommended Course of Action................... Situation Assesment.................................. Preface................................ Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 3 of 10 ...................5 3....................3.....7 5..........Strategic Marketing Management / WEMBA11 Table of content 1.............................................................................. Identification and Evaluation of Alternatives................................................................6 4...................................03....................4 2....2006........................doc Version: V1.....
Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 4 of 10 . upd25. Chapter 3 Defining Problem/Decision Area – problems and managerial decision areas for the company. Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk.Strategic Marketing Management / WEMBA11 1.03. Preface The goal of this document is to present in proper evaluation form HBS TiVo Case analysis. Chapter 4 Identification and Evaluation of Alternatives – list of feasible alternatives. Chapter 2 Situation Assesment – synopsis and evaluation of TiVo current situation. In order to prepare this analysis author used information from HBS TiVo case given by SMM trainer and available on WEMBA Memento website.doc Version: V1. Chapter 6 Appendix – this section contains addition data used in TiVo case analysis. Chapter 7 Sources – bibliography. The document has the following logic structure: o o o o o o o Chapter 1 Preface – general document information. Chapter 5 Recommended Course of Action – recommended steps to take to solve the problem.3.2006.
e. medium.03. direct marketing in stores. Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk. for example: pause. TiVo device offfers four different quality categories: basic. In short description TiVo device uses MPEG-2 compression/decompression algorithm to store TV streams on builded-in hard disk with 2 main capacities: “14-Hour” and “30Hour” box.2006. upd25. In order to produce and deliver reliable and resilience hardware alliance with Sony and Panasonic companies was established.: major consumer electronics stores) and high customer satisfaction index the market penetration was only about 0. Situation Assesment TiVo company has developed and introduced into the market black-box hardware device that brings a whole set of new features to the classical TV. Of course TiVo prepared very aggressive marketing compaing (in mass media. Price for end user per one box was established at 1. According to information from TiVo case product was lunched in USA during Christmas 1999 and after fourteen months has signed up 42. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 5 of 10 .000 subscribers. billboards etc. Internet surfing. TiVo marketing team finds out that despite availability in many distribution channels (i. with growth rate of 14.000 new users per quarter. Main competitors for TiVo products comes from Replay Networks(ReplayTV black box) and Microsoft(Ultimate TV).000 USD level. Especially Ultimate TV is a tough business enemy since it is bundled with satellite television and its features includes: access to electronic mail. In other words the product offers on-demand TV which is of course very attractive from the end user point of view. high and best picture quality. interactive television and personal video recording.3. fast foward/rewind and replay in slow motion TV stream and much more (functionality of TiVo black-box is described in details in HBS TiVo case). In my opinion assuming certain point of time(year 2000) the main business challenges for TiVo are: achieve significant competitive advantage attract business partners such as TV stations enhance market share and dig penetration improve profitability In this case analysis I will try to make some recommendation for TiVo executives that should help to achieve above listed business targets.04%.doc Version: V1.) and some of its ads was even amusing for some of potential business consumers/partners – for example so called “Network Executive” advertisement was badly perceived by CBS station.Strategic Marketing Management / WEMBA11 2.
similar competition products) sales and distribution strategy (Sales Manager) sales stuff management (Sales Manager.3. CFO. Given lists illustrate only a high-view of problem/decision areas and should be treated only as a input for problem/decision breakdown structure. price wars) lack of product uniqueness functionality (low profitability. Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk. low profitability since high training costs) lack of competitive advantage (sales low growth symptom) inadequate marketing compaign (sales low growth symptom. CEO) business partnership strategy (CEO. In author opinion in most business cases top-down problem definition methology is desirable one since we don’t lose problem target.2006. Marketing Manager) strategic planning (CEO. HRM) product enhancement strategy (Product Manager. which consists of such a rich subjects as: compensation plans. However some problem areas are worth to underline: high sales stuff turnover (sales low growth symptom.03. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 6 of 10 . Of course all managerial changes should be properly integrated in order to develop consistent business solutions.Strategic Marketing Management / WEMBA11 3.doc Version: V1. upd25. low profitability) high cost of operations and distribution (low profitability) high production costs (low profitability) low entry barrier (low profitability. price wars. Marketing Manager) operation management (Operation Manager) marketing strategy (Marketing Manager. Defining Problem/Decision Area Considering any business problem it is always a good idea to indicate key areas which need to be evaluated and improved. I believe that there are a lot of problems and their symptoms in TiVo (regarding the company situation in 2000). training and career development. Marketing Manager) According to the above list the following decision areas for TiVo managers was defined: Almost all of management areas are touched by problems that arised in TiVo. genealogy and we can achieve any desired level of problem details as well. CFO) customer value management (CEO. evaluation/assessment methology etc. As an example we can use “sales stuff management”.
central help desk etc.: addressed to proper customer segment like yuppies for example (ads only in popular magazines. Of course this strategy (Red Strategy) assumes a massive war prices so only core business must stay in TiVo company and all others (especially production and logistics) should be outsourced.2006. Low profit production means in many cases massive scale in order to achieve shareholders targets so TiVo would be interested in gaining market share via low prices.03. 2. upd25. free in-house installation.3. TiVo could sales some really complex PDR products for high-end customers (expensive one) but still have some medium-price products with better than avarage quality and functionality. Core business in Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk. The balance between R&D investments and sales expenses must be well defined. Business Partnership and Strategic Planning. Human resources management must be improved as well in order to sustain best workers for job and to ensure that there is rational workforce turnover especially in R&D and sales department.e. clubs etc). In this strategy we need to achieve meaningful competitive advantage using unique product and service offering. i. On the other hand we need product that is more sophisticated and valued than others but easy-to-use on the same time. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 7 of 10 . Identification and Evaluation of Alternatives In order to answer the question how TiVo have possibly enhance their business capacity and improve market situation author has recognized the short list of available managerial decision strategies: 1.Strategic Marketing Management / WEMBA11 4. Well there should be made some smart decision about R&D investments since we are not interested in become innovation leader but rather to achieve nice almost flat stream of profit. It is a must to establish strategic business partnership with big retail chain stores and develop internet sale channels as well. So in TiVo case I would recommend to minimize: “Sales and marketing-related parties” and to optimize “General and administrative” expenses. S&D strategy. guideline for newbies. In this field I would suggest to minimize R&D as well and to sustain general accepted and required by customers product innovation index.doc Version: V1. Stay on the market as one of the many personal video recorder company (PDR) producer At first look it may seems not to be very sophisticated managerial decision to stay on the market average position but it can also be a challenging task when like in TiVo cases financial results are declining. Improve market position and try to become the PDR business leader Of course this plan is definitely not easy one since not only TiVo inner optimization will be necessary but deeper and broader market penetration and product uniqueness gaining are the key elements. This strategy should ensure generating high entry and exit market barriers for potential competitors. I would suggest add some really valued services like: free-of-charge internet user tips and tricks. From HBS TiVo case Exhibit 3 we can see that not only sales growth are declining but net loss is still growthing. Key business areas which must be taken into account during implementation are: Operation Management. So if TiVo executives wants to stay on average they must concentrate on operations optimizing and they should compress marketing investments (marketing compaing expenses in mass media for example) since their will be enough customers awareness to buy PDR generated by other companies ATLs and BTLs. Definitely sales and marketing compaign in this plan should be well designed. Main disadvantage of this strategy will be most probably low ROIC ratio and after some time shareholder and stakeholders might be interested to move to another business area.
Core business areas would be: Operation Management. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 8 of 10 . for example: selling know-how for big HiTec company. HRM. 3. Basing on previous business experience TiVo could invest in interactive internet TV for example and some advanced consulting services for other Hi-Tec companies as an additional profit stream. Value Management. Refining and improving financial condition thru operation optimization and investment cutting could improve the company market to book value ratio and increase probability for acquisition or merge with another Hi-Tec bigger corporation.3.Strategic Marketing Management / WEMBA11 this case would be defined by: Product Enhancement. Value Management and Strategic Planning.doc Version: V1. Leave the PDR market and search another business opportunities It might not be so easy at might sound at first – of course if we want to get enough assets to start invest in another business. First of all TiVo management should try to get from current business as much as possible. rights for brand (Lenovo – IBM example). upd25. Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk. Of course TiVo could try just to sell at best price their assets but I would rather say that this is suboptimal solution because their main assets are based on intangible assets like know-how and established brand name.03.2006. R&D and S&D areas.
Still they can have excellent results like Wal-Mart for example – but in order to achieve this they have to be masters of operations management. These companies are playing their business roles on so called Red Ocean – when competition is based heavily on the price. Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk. Recommended Course of Action Basing on prepared assessment and described managerial alternatives author would suggest to implement second strategy. Another companies based mostly on innovation will be looking for Blue Ocean markets and trying to build product and service uniqueness (Apple for example) and author strongly recommends for Hi-Tec company to look for such one since electronic production heavily moved to Asia countries and only new design/quality/functionality could be a solid source of the company profits.e. upd25. My recommendation is sourced by idea that the company should always looks for the best alternatives because in other case shareholders will move their equity to more attractive opportunities. Flat self-growth strategy like the first one is only good for companies that do not want to manage higher risk in order to achieve better financial results. We could see a lot of such examples in real life – clones of really innovative products but still they do not have to invest in R&D which of course from financial point of view is advantage (ordinary MP3 player and iPod for example).3. i.03. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 9 of 10 .Strategic Marketing Management / WEMBA11 5.doc Version: V1.2006.: “Improve market position and become the PDR business leader” and if its fail than go for third one: “Leave the PDR market and search another business opportunity”.
Sources 1. HBS TiVo Case materials. 2. Document: Owner: Subject: SMM_TiVo_Case_Analysis_RafalKowalczyk.Strategic Marketing Management / WEMBA11 6.doc Version: V1.03. “Marketing Management 12e” by Kotler and Keller.2006. upd25.3. Rafał Kowalczyk Strategic Marketing Management Date: 2006/03/25 Status: Final Page 10 of 10 .
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