2008A Strategic Management of Media Sunday, October 9, 2007

CASE: REUTERS

Historically, Reuters has done a tremendous job of seeking blue ocean opportunities and leveraging the first mover advantage to captivate its customers. Combined with the lock step sense of its customers needs, Reuters was able to dominate local markets. Largely uncontested in Europe and owing by far the most reputable brand, Reuters provided information to where it counted most – Financial Services Industry. Before internet existed, Reuters provided technology that connected financial markets with users of information in these markets, users whose business and probably life, to a certain degree, depended on the availability of this information. In such environment, the question was not how cheaply Reuters could provide these services, the question was how quickly and reliably Reuters was able to provide information to companies whose competitive advantage depended on such information. In fact, it was in everyone’s interest that this service was not cheap because it provided barriers to entry to smaller players making it more expensive to enter the business and harder to be competitive without economies of scale which would take years to develop. Attractive-looking Reuters workstations were as much about prestige as they were about technological necessity and additional barriers which protected everyone in this relationship. This wonderful ecosystem remained for decades and Reuters enjoyed the era of triple—digit margins. Then the internet came. Faced with increased competition, lowered technology hurdles and overall commoditization of the information and analytics industry, Reuters was forced to embrace the new wave and make it company’s priority to look at this destructive technology as a central component of its new strategy. What soon followed can be best described as a cacophony of contentious ideas about strategy. Infected by the “Internet” bug of the late nineties, company started investing in and acquiring many companies, seemingly paying little attention to how they fit and contribute to the whole. Moreover, most of its investments not lost money but did so more successfully as the time went on. Recipe for future success remains unclear. On one hand, company can neither completely abandon its internet cacophony, nor can it continue along its current course. Gaining crystal-clear understanding of its value proposition and sources of competitive advantage with current customers should be an important component of their future vision. Internet models and businesses that do not profitably contribute to that vision and sustainable advantage should be abandoned. As a second priority, Reuters should prepare for industry consolidation. As competition
CBS |Strategy Management 1

merger activity is likely to increase. CBS |Strategy Management 2 . October 9.2008A Strategic Management of Media Sunday. 2007 increases. and some of the giants lose their footing. Company needs to either look for potential acquisitions or be ready to be approached by an acquirer.

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