Strategic Management Report: Yahoo!

Prepared for:

Course: MGT 489

Section:

Instructor: Mohammad Hannan Miah

Prepared by:
LETTER OF TRANSMITTAL
21st August, 2017
Mr. Md. Hannan Miah
Senior Lecturer
School of Business and Economics (SBE),
North South University

Subject: Submission of the Final Project “Strategic Management on Yahoo!”

Dear Sir,
With due respect, we are group X of section Y of your Strategic Management course. According
to your instruction, we have analyzed Yahoo! and its strategic implications currently, and take a
formal approach towards developing strategies for Yahoo!. This report will give you an idea, of
the knowledge we have gathered from your course as they are interlinked with the processes we
have followed while preparing this report.
We would like to profoundly thank you sir for giving us such a task and the continuous guidance
and feedbacks you have provided us throughout the lifespan of this project. We express our
sincerest of gratitude and we would be obliged if you would kindly accept our report.

Sincerely,
EXECUTIVE SUMMARY

Starting the journey with a contemporary and specialized entrepreneurial soul, Yahoo! Inc. was

one of the most successful web portals of its time. The company shaped the edge of the „Internet

Generation‟ during the „90s. However, Yahoo!‟s glory and position as an industry leader was

stripped away by emerging competition and technological changes in the market. This report

discusses Yahoo!‟s actions over the years and investigates the internal and external causes

behind Yahoo!‟s demise. The report also provides a renewed set of corporate-level, business-

level and functional-level strategies that may help the company to take a positive turn.

The findings in the report exhibit that some imprudent managerial decisions and incompetency to

reach lucrative agreements on time, caused some major breakdowns along its journey. Yahoo! is

guilty of both spending excessive resources on redundant operations and not spending enough

resources on potential successful strategies. As a result, the company lost its customers and

market share.

The report recommends a few strategies including a joint venture with SAS to develop a

Business Intelligence software, strengthening its advertising field and re-energizing its social

media sites with added features. These strategies can be beneficial for Yahoo! to regain its

customer base and secure its position in the market.

Table of Contents

INTRODUCTION 1

History: 1

INTERNAL ANALYSIS 2

Resources: 2

Capabilities: 2

EXTERNAL ANALYSIS 3

Industry Analysis 3

Identification of Industry 3

Competitive Forces Analysis- 3

Industry Life Cycle Analysis- 4

PESTEL 5

Political- 5

Economic- 5

Social- 5

Technology- 6

Environmental- 6

Legal- 6

SWOT ANALYSIS 6

Strength: 6

Weakness: 7

Opportunity: 8

Threat: 9
DEFINING YAHOO’S BUSINESS 10

DISTINCTIVE COMPETENCY 11

COMPETITOR ANALYSIS 11

FINANCIAL PERFORMANCE 11

VALUE CHAIN ANALYSIS 12

COMPETITIVE ADVANTAGE 13

YAHOO’S BUSINESS MODEL (B2C) 14

THE BUSINESS MODEL CANVAS OF YAHOO 15

RECOMMENDATIONS 16

1) Attain Technological Innovation through Yahoo Intellect! 16

2) Implement Advanced Advertisements Results in Tumblr and Flickr 17

CORPORATE LEVEL STRATEGY 18

Joint Venture 18

Related Diversification 19

BUSINESS LEVEL STRATEGY 20

Yahoo Intellect! 20

Business Model 21

Tumblr, Flickr and Click Advertisements 21

FUNCTIONAL LEVEL STRATEGY 22

Research and Development 22

Marketing 23
 Human Resource Management 24

Data Resources 24

TECHNOLOGY STRATEGY 24

Killer Application 24

Disruptive Technology 25

Profiting from Innovation 25

REVISED BUSINESS MODEL 26

COMPANY GOVERNANCE 27

STRATEGIC CONTROL SYSTEM 28

Feedback Mechanism 28

Strategic surveillance 28

ORGANIZATION CULTURE 29

GLOBAL STRATEGIES 30

ETHICAL VALUE PROPOSITION 31

Bibliography 33
INTRODUCTION

Yahoo! Inc., one of the pioneers of the early Internet era in the 1990‟s is an American

multinational technology company situated in Sunnyvale, California. Yahoo! is recognized

worldwide for its search engine Yahoo!, and other services, such as Yahoo! Mail, Yahoo! News,

and Yahoo! Answers etc. Yahoo has a worldwide customer base of 274 million „each month. It is

one of the top renowned companies in the online services providing industry. Yahoo itself has

become a miniature world, providing people with almost all sorts of services over the internet.

History: Yahoo, „being founded by two electrical engineering graduates of Stanford University,

started off as, “Jerry and David‟s guide to the World Wide Web”, as a basic directory to other

websites listed on the internet. Later it was renamed to" Yet Another Hierarchical Officious

Oracle" (Yahoo!)in January 1995. Thus the family brand Yahoo! was born.

Development and Growth: When Jerry and David saw Yahoo! was catching attention fast; they

registered it as a company in April 1996. Yahoo! raised a staggering $33 million by selling

2.6million shares at a face value of $13 per share. Concurrently, first-ever exponential growth

came in the 2000‟s. Based on its established brand image, it added features and services like

Yahoo! Mail, Yahoo! Messenger etc., and acquired many other small companies to enhance its

services. On 3rd January 2000, Yahoo! reached a milestone „attaining record share price of

$118.5. From 2002 to 2004, the company's net income rose from $42.8million to $839.6 million.

Unfortunately, the purple patch of Yahoo! did not continue, and soon its share price hit an all-

time low of $8.11, „followed by Yahoo! turning down a lucrative takeover deal from Microsoft.

On July 25, 2016 Verizon Communications announced its acquisition of Yahoo!'s main Internet

business for $4.83 billion. (Yahoo! Inc. Success Story, n.d.)

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INTERNAL ANALYSIS

Resources: The tangible and intangible resources of Yahoo are as follows:

 Yahoo! has many patents, which are solely used for their benefits.

 The brand value of Yahoo! ensures awareness among internet users and customer‟s

loyalty.

 Yahoo! has a huge information database collected from its operations. It also has

automated and cloud top of the line servers, artificial intelligence, software and domain

developer tools, State of the art R&D facility etc. They also have automated computer

vision, which detects user salience.

 Yahoo! has superior search engine algorithm developed in its panama project, which can

help Yahoo! to write components of it in other programs, making them more engaged.

Capabilities: The organizational structure, culture, hiring process and overall process are as

follows:

 Yahoo promotes diversity by not focusing on ethnicity in the hiring process. Focus is

greater on individual skills, creativity, innovativeness, education, teamwork,

collaboration with others, hands on approach towards problems, leadership etc. as an

indicator to performance. This encourages a collaborative, empowering, friendly,

interactive, supportive, performing and innovative work environment.

 Yahoo offers extensive benefits to its employees to keep them motivated. The package

includes adoption assistance of up to $5000, dental plan, employee assistance program,

employee stock options, flexible spending account for healthcare expenses, life

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 insurance, long-term disability medical insurance, and many other benefits. (Yahoo Jobs,

n.d.)

EXTERNAL ANALYSIS

Industry Analysis

Identification of Industry-Yahoo! is a multinational technology company in the internet software

and services industry under the Information Technology sector. Currently, even Yahoo! is

unclear about the industry they belong to. According to Yahoo‟s view of its competitors and its

business model, Yahoo! with its scattershot is competing in all of these areas: online search,

mailing services, social media, e-commerce, data analytics, marketing and advertising

technology, Web developing, broadcast, messaging, media etc. i.e. online services. (Kim, 2016)

Competitive Forces Analysis-For competitive forces analysis, we have used Porter‟s Five Forces

model to draw a clear picture of the degree of competitiveness in the industry. They are:

 Threat of New Entrants: Threat of entry in the industry is low because the established

companies have their own innovative products and entry requires high investments,

which sets as an impossible benchmark for the new entrants. Besides, brand loyalty exists

making customers hesitant to try out services by new companies.

 Threat of Substitutes: Until now, there is no industry that can substitute internet software

and services. So the threat of substitutes is currently nonexistent. However, there may

come a technology which can fully substitute internet software and services. But this is of

no major concern at the moment.

 Bargaining Power of Buyers: Bargaining power of buyers is moderate. The business-to-

business buyers have limited number of sellers to choose from, each holding large

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 proportions of the market resulting in immense competition. The purchases constitute a

long-term engagement between buyer and seller. Thus, companies try their best to draw

in more buyers. This leaves a moderate amount of bargaining power for the buyers. In the

business-to-consumer category, users have sufficient awareness about the services

provided by each alternative and their conveniences. Similarly, as switching cost is low,

customers have some level of bargaining power in this industry.

 Bargaining Power of Suppliers: In internet software and services industry, there are

various suppliers like data banks, online platform providers, advertising companies,

online security providers, web portals etc. Companies in the industry have a huge range

of options to choose „from among the suppliers. The buyers are usually price sensitive

and are fully aware of supplier alternatives and their offerings. Thus, the overall

bargaining power of suppliers is low.

 Intensity of Rivalry: The number of competitors is huge in the industry. Industry growth

is slow and close to zero, which is why customers‟ demands are being replaced than

being created. The switching cost of customers are low, as almost all the services in the

internet software and services industry are free. Even though there is presence of brand

loyalty, the number of renowned brands are high in this industry. As a result, the intensity

of rivalry is quite high.

Industry Life Cycle Analysis-Based on our analysis, internet software and services industry is

currently at the maturity stage for the following reasons:

 The market is already saturated and dominated by corporate giants like Google,

Facebook, Spotify, Skype, etc.

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  The growth in the market is close to zero because almost all the internet users are already

committed to specific internet software and services.

 The demand of one service is sometimes replaced with another service. For example:

people using Yahoo Mail is shifting to Gmail because of reliability and added features.

 Brand loyalty, product innovation, and large entry and exit costs work as major barriers

to entry in the industry, leaving low threat of new entrants.

PESTEL

Political- Yahoo has to sign agreements with the government of respective countries to provide

service in those countries. The government of a country also decides what can be aired in the

country‟s web, and thus can even ban or limit activates of companies like Yahoo from various

fields, like search engine, e-mail services, etc. causing blackout in all dimension, familiarity,

revenues from advertisements, links to information that comes from that country, etc. The

government can also decide which article gets priority in terms of search results and can thereby

sway public opinion. (Segev, 2008)

Economic- If online businesses shut off their business and close their domain suffering from an

economic depression. (Direct Impact)

Most of Yahoo!‟s revenue is generated from advertisements. So, a country where the economy is

booming and requires more digital advertisements, Yahoo! can make profit from the

advertisement revenues. Other factors like high wages, prolonged economic depression etc. can

raise questions of sustainability in that economy. (Indirect Impact) (Dillet, 2016)

Social- Social change is not rapid anywhere as it is in the internet world. Being an internet

software and service company, it is necessary for Yahoo! to keep up with current trends,

demographic shifts, and serve the customers accordingly.

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Technology- Technology advances at varying rates in different countries and it is important to

keep up with the advancements. Technological advancements and products associated with it

nowadays seem to come at a very rapid pace, increasing competition. However, it can bring

opportunities like low cost and efficiency.

Environmental- In response to carbon footprint, Yahoo maintains its patented “chicken coop

design” which helps in water efficiency and class energy, including a 75% decline in cooling

energy in comparison to a regular design of a data center. They have this technology in many of

their largest data centers. They also maintain a stand, placing high value on their non-renewable

natural resources, in addition to their other company-wide campaigns in order to maintain their

business‟s carbon footprint as low impactful as possible.

Legal- After the data breaches of 2013, 2014, and 2016, legal action against hackers is a massive

issue that yahoo has to deal with. Copyright support provided could influence who chooses to

publish their work where. If Yahoo provides good backing to the users, it is likely people will

feel safer to publish through Yahoo.

SWOT ANALYSIS

Strength:

 Brand Value– being a pioneer of the internet service providers, Yahoo still has a massive

brand value even after their massive decline in performance and reputation.

 Diversified Range of Services and Product Portfolio– their portfolio is more diverse than

any other company in the industry.

 Huge Customer Base, Powerful Marketing Company– because of the brand value, they

still get massive exposure from advertisement.

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  Huge information Database– this helps them conduct highly accurate market research and

plan accordingly.

 Environmentally conscious– they can claim to be more conscious of keeping things green

than any of their competitor, giving a boost to their goodwill.

Weakness:

 Bad succession planning and string of bad CEOs– they have had six CEOs in 18 years,

which is not a sign of good consistent performance. This tarnished their reputation.

Hiring Marissa Mayer from outside, that too from Google, instead of choosing from the

capable inside employees was a massive set back as well. (Mattone, 2016) (Oreskovic,

2015)

 No clear mission statement– They are still not sure about their mission and changed the

company description 24 times in 24 years. (McGoogan, 2016)

 No innovation drive and failed capitalization of search engine and social potentials–

It was not able to improve and piece together a proper search engine, and struggled to

monetize the potential of Flickr and Tumblr. Yahoo was also left behind when there was

no need for accessing the internet via web portals. (McGoogan, 2016)

 No driving force at the top– Their co-founder Yang walked away from Yahoo in 2012 to

follow his interests outside of Yahoo. This resignation left the company without an

existential purpose or driving force. (McGoogan, 2016)

 Employee dissatisfaction– The unpopularity of the current CEO and the lack of driving

force and good leaders at the top has left Yahoo employees demotivated. Similarly,

having unclear idea about the company‟s mission, serves to confuse its employees and

their goals. This has led to a lack of good performance by the company in general. The

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 rating system established by the current CEO which has contributed in the firing of many

employees is also one of the main reasons for this. (Goel, A Yahoo Employee-Ranking

System Favored by Marissa Mayer Is Challenged in Court, 2016 ) (Goel, Yahoo‟s Brain

Drain Shows a Loss of Faith Inside the Company, 2016)

 Losing its market share in all of its subsidiaries–This happened as they failed to capitalize

and monetize on many of their opportunities, to keep up with competitors in terms of

innovation, and to bring forth a leader to be the driving force at the top.

 Scattered across the industry–They cannot focus on specific subsidiaries to do well.

 2008 recession backlash–They had little to no recovery from said depression, which

ultimately led to them lagging behind in the industry and then being sold off.

 Yahoo!‟s strategic mishaps have resulted in Yahoo! not being able to capitalize and gains

from the smart phone market. Their late entry in the market and lackluster applications

has lost them the market share they could have obtained if they made the competitive

move like Google. This results in further loss of market share and possible inability for

Yahoo! to be competitive in this industry in the future as well.

Opportunity:

 New Technology– Since they will now have exposure to higher capital and new

technology after the acquisition by Verizon, Yahoo can use it to their advantage to

explore new markets, innovate, or to improve their current operations.

 E-commerce– Yahoo can explore new dimensions of e-commerce with said industry

being on the rise.

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Threat:

 Competitors are too strong– Rather than specializing in one or two sectors of the

industry, Yahoo targeted numerous sectors like online search, mailing service, social

media, online marketing, media and many more, making it difficult for Yahoo to handle

all of them at once. As a result, Yahoo is underperforming in all the subsidiaries and also

lagging far behind its competitors.

 Data breach again from hackers– The incident of major data breaches happened more

than once at Yahoo, first one around August 2013, the second one in the late 2014, and

the third one, during the second half of 2016. These hacks affected over 1 billion user

accounts, making yahoo seem quite unreliable to the users. (Goel & Perlroth, Yahoo Says

1 Billion User Accounts Were Hacked, 2016)

 Google is grabbing revenues from advertisements– They are losing out on revenues

because of the market captured by their biggest competitors.

 Verizon take over– The acquisition brings forth a chance of Yahoo being overshadowed

by the now parent company.

 Lack of privacy for customers- Orders of disclosing information to government in times

of global or national security threats says that Yahoo cannot protect their users‟

information from higher powers. The data breach was an example of the inability to

protect user information from unknown sources too.

 In a matured industry– There is little chance of growth for Yahoo at the current state of

the industry without taking competitors share.

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DEFINING YAHOO’S BUSINESS

 Customer group: Essentially, the entire group of the 3.7 billion people using Internet and

surfing the web is Yahoo‟s target customer. This group includes both the regular Internet

users and the business entities that want to digitally promote their goods and services

through advertisement.

 Customer need: Web surfers want to have an uninterrupted, convenient and smooth

functional experience while using browsers or search engines for various purposes.

Businesses need a strong web existence, along with solutions to their marketing and

operations.

Yahoo‟s mission statement is “To connect people to their passion, communities, and the

world’s knowledge.”

Yahoo‟s goal is to simplify user interface and provide better search result through personalized

experience. The major player in this field is “Yahoo Search”, and the company‟s search alliance

partnership with Microsoft have opened new doors of opportunities for it. Yahoo has a large

number of branded sites to cater towards different customer needs. These websites include

Yahoo Answers, Yahoo Mail, Yahoo Finance, Yahoo Movies, Yahoo Music, Yahoo Mobile,

Yahoo TV, Yahoo News, Yahoo Sports, Yahoo Travel, Yahoo Autos, Windows Live messenger

etc.

Yahoo also has Yahoo Advertising that offers promotional and advertising services to businesses

through Yahoo Publisher Network, Yahoo Groups, Yahoo Search Marketing.

The vast range of services that Yahoo is providing through their branded and non-branded sites

construct their entire business foundation.

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DISTINCTIVE COMPETENCY

Based on our internal analysis and analysis of its competitors, there was not any resource or

capability that sets Yahoo apart from the competitors. It can be concluded that Yahoo does not

have any distinctive competency at the moment that helps them to gain advantage over their

competitors.

COMPETITOR ANALYSIS

3I Model

Yahoo Immediate Competitors Impending Competitors Invisible Competitors

Webpages/portals

Yahoo Search Google search Alta Vista, Lycos Amazon, Facebook

Yahoo Answer Wiki Answers Ask.com Quora

Yahoo Mail Gmail Outlook.com

Yahoo Finance Investopedia Government websites

Tumblr Wordpress.comBlogger.com, Hubspot Linkedin

weebly

Yahoo Publisher Propeller Ads, RevenueHit Link Connector, Affiliate

network future

Yahoo Advertising Google AdWords, Facebook, Bing AdRoll Infolinks

Ads

Flickr Instagram, Imgur, Google Photos PhotoBucket 500px

(Blystone, 2015) (Moth, 2013)

FINANCIAL PERFORMANCE

Ratio Analysis 2014 2015 2016 2017

Current Ratio 2.14 5.88 6.31 6.687

Net Profit 1.62 -0.877 -0.041 0.0749

Return on Investment 27.84% -12.32% -0.65%

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The current ratio shows the ability to cover up short term liability. Over the year, Yahoo has

been able to cushion against the threat of a sudden rise of the current liabilities since it has

always been greater than 1. However, it also indicates that, its resources have been tied up in

working capital and have been inefficient as it has always been over 3 since 2014.

Yahoo had a positive profit generating value until 2014. There has been a drastic decrease in net

profit. The net income was at its lowest in 2015.Similarly, Investors did not make much profit by

investing in Yahoo. Despite large Alibaba Group Holdings Limited, over the last 10years

YahooInc. stocks could only return 8%. This is because of their poor operational performance.

The shares have only appreciated 8% from 2006 to 2016.

However, Yahoo‟s Cash Reserve and equivalent short term investments sum up to $6,911.06

Million, which can be accessed by Yahoo to maintain its operations and facilitate other services

of their needs.

VALUE CHAIN ANALYSIS

Figure 1: Business to Business

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B2B Value Offering of Yahoo -Give companies a fully-fledged web existence and assists them

in digital marketing of their products and services and maintaining their web operations.

Figure 2: Business to Consumer

B2C Value Offering of Yahoo -Provide a free online platform to customers, based on the

provision of all sorts of information revolving current world events tailored to customer‟s

preference, along with a fast and reliable mailing service.

COMPETITIVE ADVANTAGE

Yahoo does not have a core competency, which in turn results in no competitive advantage. The

competitors of Yahoo are offering innovative and differentiated services, while Yahoo doesn‟t

have anything that sets them apart from the competitors. Whatever Yahoo is offering; the

competitors are offering better. However, Yahoo is still surviving in the market due to their loyal

customer base of 1 billion active users (monthly), which they were able to achieve at the time

when Yahoo was flourishing and doing quite well in the market. They have lost that competitive

advantage due to failure of keeping up with the competitors, lack of creativity and lack of a

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charismatic leader. Now their business is going downhill and they are substantially losing market

share.

YAHOO’S BUSINESS MODEL (B2B)

YAHOO’S BUSINESS MODEL (B2C)

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 THE BUSINESS MODEL CANVAS OF YAHOO

Key Partners Key Activities Value Proposition Customer Relationships Customer Segments

 Yelp (restaurant  R&D: Algorithms; B2B B2C  Anyone with internet

reviews); NBC sports Automated computer access.
group (Sports news); vision.  Individuals- for personal
AOL; Microsoft,  Customer analysis.  Full-fledged web  Yahoo has FAQ use.
(advertisement  Online existence. pages.  Businesses- for setting up
selling) etc. advertisements.  Assists in digital  Help centers online platforms.
Key suppliers  Help centers and marketing. B2B
video guidelines.  Maintain web
 Interactive apps. operations.
 Inuvo (Digital B2C  Merchant solutions
publishing and  Interactive videos
advertising
technology); Babylon Key Resources  Free online platform Channels
(online and offline  Provide all sorts of
dictionary); AVG information regarding
technologies NV  Brand name and current world events.  Provide services over
(provides online Logo.  Fast and reliable the internet.
security and identity  Innovative and mailing service.  Cloud computing.
Protection); Excite creative employees.
Japan Co.  Database and server.
 Web crawler system
for search engine.

Cost Structure Revenue Streams

 Selling/General/Admin. Expenses $366.2 million  Paid user membership; Online marketing service; Tumblr ($1.1 billion in
 Research & Development $252.22 million 2013); Flickr; Search engine revenue ( on average $500 million/quarter);
 Cost of revenue $750.28 million Online advertisement ($500 million/quarter); Flurry ($270 million in 2014)
 Miscellaneous $5.81 million

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RECOMMENDATIONS

Yahoo has been going through downfall due to lack of innovation and differentiation. Whatever

Yahoo is offering; competitors are offering better. They tried to overcome it by introducing more

and more subsidiaries, as a mean of diversifying their business in multiple sectors. It amplified

the problem by burdening Yahoo with more subsidiaries to handle. Based on the analysis, it is

found that technological innovation seems to be the optimal solution to turnaround yahoo.

Because existing branches of Yahoo is so far behind the competitors, that it will require a long

time for them to match their standards. Whereas, technological innovation will help bring new

use and convenience for the consumers and draw in new demands. Along with innovation,

redesigning their existing mobile apps will widen its customer base and the implementation of an

efficient online advertising system will generate greater revenue. Thus, Yahoo should implement

the following strategies:

1) Attain Technological Innovation through Yahoo Intellect!

Yahoo should introduce a new product line that promotes technological innovation. Nowadays

many businesses are seeking help of computer software to do analysis and present an actionable

information to make crucial managerial decisions. Yahoo Intellect! is just the business idea

which is a business intelligence used for in-depth analysis of data throughout all the departments

of business like production department, human resource department, finance department etc.

This software will also suggest courses of action to be taken in the respective departments, based

on the analysis of raw data. It is unique from all the existing business intelligence software in the

market, because it is applied and integrated in all the departments of the business. Meaning,

information is also processed between departments and the decision making becomes easier for

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the manager, as he can see the bigger picture through this software. Existing business

intelligence doesn‟t have this feature; they are used in a single department of the business.

This strategy will utilize the following strength of Yahoo:

• Brand Value.

• Huge Information Database.

It will utilize the opportunity of:

• New Technology.

It will improve the weakness of:

• No innovation drive.

It will mitigate the threat of:

• Survival in a matured industry.

• Too strong competitors.

2) Implement Advanced Advertisements Results in Tumblr and Flickr

Tumblr and Flickr have substantial customer base and Yahoo‟s majority of the revenue is

generated from their advertisements. Yahoo should introduce an advance search algorithm which

will provide customized advertisement results for each users and the advertisement results will

be arranged according to their rating among customers, rather than rating through highest

bidding. Besides, Tumblr and Flickr will both undergo major revamp in the mobile app versions

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so that it is more interactive and compelling for the customers. As a result, the number of Tumblr

and Flickr users are supposed to increase significantly.

This strategy will utilize the following strength of Yahoo:

• Huge Customer Base.

• Powerful Marketing Company.

It will improve the weakness of:

• Not using social potential

It will mitigate the threat of:

• Google grabbing revenues from advertisements.

CORPORATE LEVEL STRATEGY

Joint Venture

The main reason for the joint venture is Yahoo‟s unavailability of adequate financial resources

technological expertiseand capable coders required to develop a „commercializable‟ Business

Intelligence. SAS institute serves as a great candidate to form joint venture with due to their

reputation of developing state of the art business intelligence software. In the joint venture,

Yahoo will offer its huge database for data mining, brilliant design team, data analytics, web

integration, expertise in the field of E-Commerce. marketing expertise and data, Research and

Development facility, its expertise and resources on the webhosting and domain building

business, the incorporation of many of its business analytic algorithms and the base knowledge

of Yahoo‟s own Artificial Intelligence algorithm which facilitates Yahoo‟s business model. SAS

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(Statistical Analysis System) Institute will be bringing in their sophisticated expertise and AI

developing technology, and provide the financial backing in the development of the new

technology.

SAS Institute is bound to be convinced to form a joint venture with Yahoo, because they will

have an upper hand in the business intelligence industry with the launch of Yahoo Intellect!

SAS‟s main competitors SAP and IBM have already invested in the development of Business

intelligence and have diversified their industry by becoming solution providers to businesses.

The Business Intelligence will not only help SAS to catch up strategically to its competitors, but

it will allow SAS to get the upper hand. This is because, Yahoo Intellect! is a revolutionizing

concept which will be capable of not only taking in complex algorithm to assist in decisions and

facilitating organizational activities, „it will also build an organization-wide communication and

information sharing network using Yahoo‟s algorithms. Similarly, incorporation of the Yahoo!‟s

search algorithm in the BI will ensure users having a superior, easily operative and accessible

platform taking care of half of their business activities.

Related Diversification

Yahoo Intellect! falls under “Enterprise Solution Software” industry which is different from

Yahoo‟s core industry i.e. “Internet Software and Service” industry. So, it will require yahoo to

pursue related diversification by means of leveraging competencies like Research and

Development and Information database. The research and development department will help in

designing the software from scratch and contribute in further development. They will collaborate

with SAS research and development department, once the joint venture is done. The information

database helps in data mining process, which is one of the functions of Yahoo Intellect! software.

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BUSINESS LEVEL STRATEGY

Yahoo Intellect!

Yahoo Intellect! will be our strategic dream-child to make Yahoo! survive in the technology

industry. There was confusion inbreeding within Yahoo!, determining whether they are in the

technology or marketing business now, and we decided to capitalize on the technological side

more. With, Yahoo Intellect! we aim to come up with an innovation that will change the way

businesses will operate in the future, and as very well may lay the foundation for Yahoo!‟s

profitability for the next 5 year period. Our main objective with the BI is to provide a value that

supersedes all current offerings of all individual developers, by offering a sophisticated, Business

Intelligence „tailored to specific organization, which will ensure organization-wide connectivity

and integration, analyze operations and external transactions to facilitate an efficient and

performing business environment. Some of the service examples would be, real time analysis

and report generation on business transactions and their statistics and trend, suggesting best

supply chain alternatives in terms of cost and quality and automating chain activities, collect

organization wide data to predict complex financial or human capital needs etc. The position of

value offering can be best described best with a Bowmen‟s Strategic Model, having a base

Business Intelligence and then the will be customized in accordance to different organizational

needs and differences.

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Business Model

The existing business model of Yahoo! will serve as a basic platform for the Business

Intelligence. It will show how the Yahoo!‟s AI incorporates all its value creating functions

through the use of an integrated system. A new business model will be developed allowing

integration of all Yahoo!‟s existing activities with Yahoo Intellect! Our business units involved

with the provision of domain and marketing solutions, and the mailing services will provide the

venture with necessary input regarding web hosting, e-commerce and services, domain builders,

business mail, database, Flurry app etc, which will be an integral part of the software.

Tumblr, Flickr and Click Advertisements

In Yahoo!‟s efforts to succeed in varying number of businesses, it has turned a blind eye on one

of its prosperous business units, i.e. Tumblr. The customer base of Tumblr has been increasing

by the day. It has a customer base that prefers blogging in Tumblr rather than being on other

social media sites. To get more people into using the application, Yahoo! will introduce a new

option which will enable the users to share their views of any blogs by posting a comment below.

The code for this feature will be developed by an innovative R&D team. This feature will make

Tumblr more interactive and customer engaging. The same R&D team will integrate the

algorithms in the applications, where it will be the duty of the marketing department to come up

with promotions which will give out the idea that, “Tumblr now enables an individual to be more

expressive, in their own way”.

Similarly, Flickr has also been seen to have an increasing customer base.

As the customer base on both Tumblr and Flickr is on the rise, Yahoo! can use this to its

advantage by providing advertisements that are more refined to the users. The algorithm that has

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been developed long ago for the Panama Project in 2007 can do this. This will incur less cost as

the main components required for it to work already exists. However, it will only have to derive

the codes with the help of R&D team.

Even though the keyword search based advertisements concept cannot be fully utilized like that

of in a search engine, but we would induce the algorithm for future advertisements in Tumblr

and Flickr by companies. The algorithm will work to identify the rate and frequency of clicks for

an ad posted which will help us to identify the salience for ads and let companies bid

accordingly. As a result, more enriched advertisements will be available in the applications,

which can help Yahoo! to generate greater revenue from push ad earnings and ad sales.

FUNCTIONAL LEVEL STRATEGY

Research and Development

Yahoo already has a strong R&D department, which engages in research, and development of

many of its algorithms, including the internet based customer ad salience detection. Yahoo‟s

R&D combined with SASs‟ will start working within the 2nd quarter of 2018, with the objective

to design and develop the integrated Business Intelligence. The algorithms will focus on

integrating and interrelating all the business interactions and activities in support of the inputs

provided.

In order to give life to “Yahoo Intellect!” as mentioned in the business level strategy, Yahoo will

need to invest in research and development. To provide the organization-wise tailored Business

Intelligence, R&D will invest in finding out how to ensure organization-wide connectivity and

integration, analyze operations and external transactions to facilitate an efficient and performing

business environment most efficiently.

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To do so, R&D department‟s objective will be to have people who have intelligence of dealing

with this technology. These people will need to develop technology to real time analysis and

report generation on business transactions and their statistics and trend, suggesting best supply

chain alternatives in terms of cost and quality and automating chain activities, collect

organization wide data to predict complex financial or human capital needs etc.

To carry out the new advertisement plans, Yahoo! R&D will only need to help derive the codes

since the other main components needed for this already exists.

Marketing

Given Yahoo!‟s already existing marketing channels and sources of acquiring information,

which it has developed overtime through its marketing solution providing business, incorporation

of marketing department in the design and developmental stage and also promoting the BI should

done with ease. In the Design stage of the BI, marketing will serve a crucial function by getting

inputs on what sort of functionality the potential buyers are willing to look for in the BI, the type

of convenience etc. and communicate it to the R&D of Yahoo Intellect! When it comes to

marketing and sales of the BI, Yahoo! will derive the marketing communication strategies due to

its existing expertise in the field, however, SAS will share their connections and clients to the

Joint Venture to assist in the reach of the customer. The marketing efforts should focus on

intensively educating the potential client base of the revolutionary system and focus towards

building a trusted brand, built on the ideology of performance, convenience, reliability,

superiority and security, „enabling Yahoo to scour different Pricing options.

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Human Resource Management

Yahoo! already has an internal mismanagement caused due to their lack of conveying clear

message among their employees. The current employees do not even know which direction the

company is going towards. To get out of this, Yahoo! will create a smooth internal

communication system and relay the current strategy of going forward with “Yahoo Intellect!”,

redesigning Tumblr, Flickr, and Click Advertisements, and the Joint venture.

They will also need to recruit new employees whose qualifications are aligned with these current

objectives.

Data Resources

Yahoo! has a large pool of data resources based on its business customers from the Abaco Small

Business and also customer data which it acquired researching the customers for the businesses

which buy marketing solutions from Yahoo! This will be necessary for the developmental stage

of the BI and also when Yahoo! will be trying to market the product. Similarly, its web

resources, including news, trends, and analysis of economies will serve in the developmental

stage, incorporating all Yahoo!‟s relevant data bank with the model for better performance.

TECHNOLOGY STRATEGY

Killer Application

Yahoo Intellect! is the killer application that will help Yahoo to turnaround their business and

shift to the Business to business market. Although business intelligence like Yahoo Intellect!

already exists in the market, there are number of reasons why yahoo‟s business intelligence is a

new technology in the market:

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• Yahoo Intellect! is the only business intelligence that is cross functional with all the

departments of a business.

• Yahoo Intellect! is capable of decision making for every department by centrally

managing data from all the departments.

• Yahoo Intellect! can project the performance of every aspect of a business like

Production efficiency, marketing performance, financial performance, Human Resource

requirements, Supplier Requirements, Supply Chain Performance etc., which aren‟t possible

through other business intelligence software.

Disruptive Technology

Yahoo Intellect! is a disruptive technology because the introduction of this software will put an

end to other business intelligence software. This software is capable of performing multi

departmental analytic, whereas other business intelligence software performs single departmental

analytic. Multi departmental analytic is the process of analysing data of multiple departments in

a business and suggesting several courses of actions based on the analysis. Multi departmental

analytic is preferred over single departmental analytic, since it is more convenient and it requires

less manual work to be done by different levels of managers in a business. As a result, it will

shift the demand of existing single departmental analytic to multiple departmental analytic,

causing a paradigm shift in the technology of business intelligence.

Profiting from Innovation

In order to profit from this new technology, Yahoo has to form a joint venture with SAS Institute

for the following reasons:

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• Yahoo doesn‟t have complementary assets required to develop a business intelligence

software.

• Height of barriers to imitation is high since software can replicated by capable

developers, even though it is protected by copyright act.

• Number of capable competitors are moderate in the market, since it is a fairly new

technology.

REVISED BUSINESS MODEL

This is the new simplified Business Model of Yahoo, incorporating the main activities of

Yahoo!, Yahoo Intelligence with SAS.

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COMPANY GOVERNANCE

Yahoo‟s downfall is partially responsible for lack of proper leadership. Besides, Yahoo Intellect!

will require a redesign in their corporate governance to support the recommended strategies. In

order to do so, Yahoo will require a new charismatic CEO with sufficient knowledge and

experience in the field of software and artificial intelligence. He should be able to guide the

company to a new design and also share a broad perspective on the progress of the company. The

board of members of Yahoo will mainly execute the task of searching and appointing a new

CEO. To keep the CEO and top level manager‟s interest aligned with the company goal, Yahoo

should allow stock options for the managers. Thus, the managers will be motivated to improve

the company performance, so that the stock price of the company appreciates. This will fulfill the

desires of both shareholders and managers, removing the shareholder and manager‟s conflict.

Moreover, financial auditing will also take place as a preventive measure for altering financial

data and overvaluing stocks, which managers tend to do in order to benefit in the short run.

Initiating Yahoo Intellect! will make intensive use of Yahoo‟s research and development. This

will also require Yahoo employees to make spontaneous decisions and induce creativity. Such a

task can be achieved by empowering the R&D personnel and decentralizing the decision making

in that department. It will encourage innovation, since employees at R&D will have the platform

to convert their concept into reality. It will also allow the employees to come up with new ideas

for Tumblr and Flickr. Approval by the top level managers will be necessary for developing new

products involving heavy capital. This will help in reducing unnecessary cost and streamlining

commercially successful products.

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Yahoo‟s earlier „pay-for-performance plan‟ did not culminate effective outcome in all the

departments. Bonus pay plans and stock-option grants are the two most effective options at this

situation, because-

• It will increase employee retention, which is extremely important because employees

might be suffering from uncertainties about changing policies due to the joint venture with SAS.

• It will motivate employees to adopt and cope up with the additional tasks regarding R&D

and marketing.

• It will encourage highly qualified individuals to join the company during the next

recruitment.

• It will also encourage high performance and growth among existing employees.

STRATEGIC CONTROL SYSTEM

Feedback Mechanism

Since the structure is decentralized and the hierarchy is flat in nature, proper evaluation and

feedback system is required. A panel will be created who would evaluate the overall

performance of the strategies, also they will monitor if the strategies are working properly or not.

They will take feedback from the employees. The performance will be evaluated by a specific

target and changes will be made accordingly.

Strategic surveillance

Through strategic surveillance, company will monitor all the events occurring both inside and

outside the company that would affect the strategy. This will include monitoring the environment

by collecting and analyzing information. This will also include distributing information to those

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who would need them. This wi66ll include monitoring certain aspect of the company and its

environment i.e. potential market entrants, replacement products, competitors in the industry etc.

ORGANIZATION CULTURE

Yahoo! Intellect is a sophisticated and state-of-the-art Business Intelligence system which has

not existed before. Similarly, the strategies surrounding Yahoo! Intellect also requires a certain

level of sophistication and a congruent culture. The suggested strategy, i.e. Yahoo! Intellect will

require a very innovative, open and creative culture. It requires a culture which will promote

cross functional teams and greater collaboration between departments. This can be achieved by

trying to engage employees more through an investment approach towards them resulting in

employees feeling more committed to Yahoo!‟s mission. In order to promote a more innovative

culture, functional departments should be empowered more along with its employees. For

example, the R&D department should feel that the design aspects of Yahoo! Intellect are all on

their hands and they need to deliver on its given terms. Along with empowerment and

innovativeness, the culture should also consist of bottom-up feedback from employees ensuring

up-to-date inputs for Yahoo! Intellect. All in all, the structure of Yahoo has to be flat, promoting

greater organization-wide communication, innovation, departmental interdependence, employee

commitment to the strategy and Yahoo!‟s Mission.

Yahoo!‟s existing culture, developed under Marissa Mayer, significantly does contribute to the

cultural views our strategy requires. Her strategy of ending work at home program was aimed to

make employees of Yahoo to work, getting them more engaged with the organizational culture,

structure and its missions, through greater teamwork, communication, sharing of ideas etc.

Similarly, she put up practices like communicating Yahoo!‟s mission extensively and embedding

them in work responsibilities trying to gain employee commitment to Yahoo! values. She

29
empowered employees to take up innovative initiatives, and even personally listened to their

ideas which can bring about innovation. This created a participative, innovative and action

oriented culture at Yahoo! as employees realized that their innovativeness is appreciated and

backed up by the CEO. In short, Marissa Mayer helped to provide a perfect cultural foundation

for our strategy. The little changes we need are in the organizational structure making it more flat

and focusing on cross functional teams and greater integration between departments.

GLOBAL STRATEGIES

When developing the Yahoo! Intellect system, Yahoo! should stop to think about how it should

design its global strategies around the system. Talking about the strategy, we believe USA‟s

factor endowments will be of great value to Yahoo! in the developmental stage. That is the

enriched technological infrastructure of USA supported by all the innovation coming out of

Silicon Valley. USA companies having superior knowhow Software and program building can

spillover to the Yahoo!‟s Business Intelligence.

To develop Yahoo! Intellect to be the superior Business Intelligence it was designed for, it is

imperative that Yahoo! leverages location economies, primarily from Yahoo! Japan. Japan is

renowned for its work with Artificial Intelligence and Robotics. Leveraging the resources of

Yahoo! Japan‟s strategic alliances and reaches with technology based companies can better

facilitate Yahoo! to acquire intelligence on software and programming support for its BI.

Similarly, Yahoo! Japan‟s partnerships with companies like, Bright Tag, Baidu, and Sizmek can

also be leveraged on the new advertisement algorithm to be induced in Tumblr and Flickr.

Yahoo! Intellects‟ basic nature begs differentiation! Though Business Intelligence can have a

core structure, but they need to be customized according to the buyer‟s company structure.

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Similarly, any company engaging in the cost benefit analysis of Yahoo! Intellect will realize the

incremental value it can bring in to an organization. Besides, the cost pressures for BI of Yahoo

is quite low, since it is a fairly new technology. This is why we prefer a Localization approach

when going into business with the BI. Thus, alongside leveraging location economies, country-

specific knowledge can help Yahoo! to engage in better value creation activities.

ETHICAL VALUE PROPOSITION

• Maintain transparency with employees in order to clearly communicate the direction that

Yahoo will take – mainly to convey the new corporate and business level strategies

• Take constructive criticism from the employees about the new strategies and plans

• Disclose the necessary information needed for the employees to know exactly what they

are doing, so that they are no longer aimless or mission-less, for example:

• Current and future goals of Yahoo

• Current and future goals of individual managers

• Provide the following to every employee:

• Safe working conditions

• Fair compensation for the work they perform

• Fair and just treatment by managers

• Understand employee needs and make efforts to improve and monitor their satisfaction

regularly

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• Acknowledge employee contributions

• Acknowledge individual differences and not stereotype employees or treat demographic

groups of employees (for example, gender, race, etc.) in a dehumanizing or negative way

32
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