Case Study of Reorganizing Yahoo

By

Group Gamma Peter, Ali, Wiriyaphochai, and Lin

MGT.527.001─Strategic Management

November 1, 2010

.......................................................................................................................................3 YAHOO’S STRATEGY................................TABLE OF CONTENTS INTORDUCTION....................4 The Reorganization Program to its problems....................................................................................................................4 Growth Strategy.........................................3 Challenges.....................................................................................................................................................................................................................................................................................2 VISION STATEMENT..2 CURRENT SITUATION....................................................................................2 Competition..........................................5 SWOT ANALYSIS..................................................................................................................................12 ii .............................................................................................................................1 MISSION STATEMENT......................................8 CONCLUSION AND RECOMMENDED STRATEGIES......................................................................................................2 Objectives...............................

direct marketing and merchandising. The company generated most of its revenue from online advertisement. It also generated revenue from monthly hosing fees and commission on online sales from it merchant partners.8 million. they created a directory to keep track of their personal interests on the internet. it had implemented a business plan modeled in traditional business broadcast media companies and in it Initial Public Offer in 1996. The company reported more than growth in revenue within four years from 1997 to 2000. And in April 1994.6 million shares raising $38. Yahoo was formally incorporated in March 1995 and in mid-1995. 85% of it revenue came from sales of banner and sponsorship advertising while the rest came from business service and e-commerce transactions. Gradually. These included transaction fees generated from the sale of merchandise from the site. primary banner ads and ad placement fees. California. promotion. The two co-founders of Yahoo! Jerry Yang and David Filo began exploring the internet as a hobby during their doctoral programs in Stanford University.Introduction Yahoo! began as a student hobby and evolved into a global brand that has changed the way people communicate with each other. They posted this list on the web as “Jerry and David’s Guide to the Worldwide Web. the company sold 2. find and access information and purchase things. Yank and Filo started categorizing web site as a way to keep track of the entire site they had visited. 1 . Later. Yahoo was drawing more than 180 million unique visitors which made the company the leading internet brand. they began to spend the more time on their directory. By mid-2000. sponsorship.

and publishers.” Vision Statement “To be the most essential global Internet service for consumers and businesses. advertisers. In addition. The company had into restructuring it hopes the situation will improve further. This made the revenue of the company to drop as dotcom was going out of business. Yahoo needs to specialize in a particular area to its target 2 . there is need to re-align the organization to be more focused on some key important services that are in vogue with the recent trends of online advertisement. Yahoo went into some partnership and acquired some other related business unit which improved it performance in terms of revenue generation. Mission Statement “To power and delight our community of united users. The objective of Yahoo is to ensure that it focus and integrated the several line of services it offers and make sure that it get back on top of it major competitors by capturing future opportunities in the market.Yahoo faced some challenges in the late-2000 which range from internal problems and the fact that the company is not changing with the environment with the sole dependent on revenue from a major source (dotcoms). the layoff of workers and loss of key personnel were other challenges the company faced.” Current Situation Objective: Yahoo is operating in a very competitive and technical market. In order to get back on top.by creating indispensable experiences that fueled by trust.

3 . Competition: The Company was facing competition from the search-related advertising companies such as Overture Company. Google was gaining double revenue than Yahoo did. Yahoo was still on its position losing more customers. The company came out with the great idea of payment for adverting by clicks. Thus. ESPN in sports Microsoft in e-mail. Inktomi Company which was later acquired by Yahoo to assist the company dominating the market. nonetheless. Yahoo was said to be competing with established players like CNN in news. the average monthly number of visitors were less than Yahoo.markets. Yahoo encountered competition not only from existing rivals but also from new ones. which lead it stocks lose several dollars. It also known for Simple home page makes it easy to users. In addition. For example. On other hand. however. In addition. This model rank the advertisements based on bid on search keywords and the number of clicks. many competitors compete to be number one in each particular area. It is now dominating the search engine web pages and became the leading search engine in a short period of time. At that time the market of online advertising was growing rapidly which allow the advertiser to choose between alternatives channel to reach their audience. and Google in search. AOL in instant messaging. Challenges: Yahoo was intended to use a new ranking model named “Panama” which may assist the company redeems customers who had left them to the popular search engine Google. Google: Google is the major rival of yahoo. MySpace and Facebook in social networking. Yahoo delayed the implementation of this new mode more than two quarter. the challenge that Yahoo was not focusing on a specific segment.

The company was using top-down method which did not encourage creativity and reduce cooperation among employee .instead it served different customers segments. Yahoo’s Strategies Growth Strategy 4 . it failed to face its major competitor Google. Yahoo ambiguity about its identity is another problem. Yahoo web page contains many links to external host compared to Google simplicity web page. Therefore. Furthermore. This is due to the fact that the company acquired some companies and. However. Google generated more revenue than Yahoo. will increase the chance that Yahoo regains its popularity. Thus. whether it is portal. This position enables Yahoo to offer various services on its website and brought cluttered as well. along with reorganization. The reason for that may be that the company was negotiating slowly with other companies which allow other rival to acquire them instead.This complexity in structure leads directly to slow decision-making process among an organization. One of Yahoo problem was mainly about being a one-stop portal. the company acquisition strategy failed to integrate those acquired companies. or search engine. Because the average visitors was 500 million compared to Google 380 Million. Besides that. Yahoo believes that the new panama Model and trends. therefore. media organization. Google was gaining great revenue compared to Yahoo special search-related advertising. The monthly visitor’s average is other problem that faced Yahoo in 2006. Other challenge is that Yahoo Company encountered an internally problem which is a complexity in organization structure.

Yahoo used horizontal growth strategy externally through strategic alliances with Google to gain competitive advantage within its industry.Yahoo was putting right people in the right places to execute it focused growth strategy. Yahoo followed a diversification strategy by expanding its services. Yahoo had has an extraordinarily skilled and experienced group of senior executives and was adding outside senior talent to that strong team. For this growth strategy. Yahoo was changing its focus to eliminate redundancies and increase accountability and decision making and emerge as a customer-focused organization. Concentration: Before Yahoo tried diversification. it showed that Yahoo had put people at the center of their strategy. such as an online careers site and a paid search services. The heads of the three groups 5 . diversifying into different industries. Furthermore. Yahoo employed concentric (related) diversification strategy to entering the more related industries. The Reorganization Program to its problems The reorganization program included the reorganization of Yahoo and major changes in it executive team. Yahoo entered into a licensing agreement with Google to use its search engine technology. Corporate Structure: Yahoo was reorganized around three groups as follows. Diversification: In order to compete against their rivals. The third group aimed at strengthening the technology function in the company. The first and second groups focus on the customers. In addition. Yahoo employed the strategies of acquisitions to enter into several partnership deals since 2002.

and creating a global advertising network on and off Yahoo sites. building a large audience in association with Yahoo partner publishers.S. The group was created to serve the customer in major customer segments such as large advertisers. Finally. Furthermore. The Advertising & Publisher Group concentrated on developing Yahoo’s advertising content. it was expected to transform Yahoo into a social media provider and help it bring in the content that was relevant to the audience.reported directly to Semel. the Technology Group made efforts for integrated product development. Also. It was 6 . Yahoo launched video content in its news services. and publishers. Yahoo released a mobile social networking service called Mixed with which customers could coordinate outings and meetings with friends using text messages and photo messages. communities and communications. resellers. Also. and marketing products. representing more than 170 newspapers in the U. the Technology Group aimed at achieving integration within produce development teams. the focus of Audience Group was to enhance its existing products in search. media. to acquire a wide reach. Product Development Strategy: According to Yahoo. The activities were simultaneously posted on the Web page. Finally. In addition. For example. The Advertising & Publisher Group was organized around three functions. the most important new product was Panama. which was Yahoo’s new algorithm and ranking model. Yahoo entered into an agreement with a consortium of nine companies. large adverting agencies and businesses of small and medium size. supply channels. The product would rank the advertisements based on the highest bid on search keywords by the advertiser and the number of clicks. The Audience Group aimed to bring coherence to the wide array of services it provided. which were demand channels.

As a result. Yahoo aimed at expanding the advertising network and remaining focused on product development. the group wants to build social media environment across Yahoo. In addition. Yahoo wanted to channel its investment toward global platforms with high impact and scalability via the Technology Group. Market Development Strategy: The Audience Group focused on creating user experiences and generating value for the advertisers. advertisers. it aimed to build a global advertising network. Yahoo adopted 7 . Regarding market segmentation. Leveraging on the investments in the communities to create technology and advertising platforms. Yahoo changed it strategy to use differentiation focus and seeks differentiation of Yahoo services in its targeted market segments which were audiences. the company planned to align its operations with the key customer segments of audiences. and publishers and capture the emerging growth opportunities especially in the Internet. Competitive Strategies: According to Porter’s competitive strategies. Yahoo’s competitive strategy was differentiation focus concentrating on a particular customer segments. In addition. Through reorganization program. advertisers. it looks forward to opening more opportunities for users to take advantage of Yahoo’s tools and services off network and through mobile and digital devices. Moreover. Furthermore.expected that users could access all the services provided by Yahoo products with a single Yahoo e-mail account. the group pursues growth opportunities in emerging international markets. and publishers. The Advertising & Publisher Group was to transform the way in which the advertisers connected with their target audience and provide them with more value. and become more customer-focused with the support of technology.

tempting them to click on those ads a little more often. Key objectives of reorganization were as follow. video games. and future engagements. SWOT Analysis Yahoo!’s SWOT analysis spans all the entire organization. Expand customer-centric culture and capabilities. Drive organizational effectiveness and scale. New search algorithm When Yahoo finally switches on the new search-advertising software codenamed Project Panama. 4. Yahoo!’s Strengths 1. Lead in next-generation advertising platforms. their communities. It planned to develop sites dedicated to high-profile entertainment brands. and movies. which is just a little more interesting. 2. Users will see the text ads adjacent to the main search results. and responsive to customers. including television shows. and the world’s knowledge. users of its search engine will hardly notice a difference. 3.” Objectives: Through the reorganization.the “Brand Universe” strategy. more nimble. the reorganization aimed at making Yahoo leaner. Yahoo aims to adjust itself to changing markets. The new mission: Yahoo’s reorganization program also brought a new mission statement: “to connect people to their passions. 1. its marketing plans. Also. Create leading social media environments. Those clicks should 8 .

4. Increased revenue from global markets Yahoo!’s globally diversified revenue growth illustrates another strength. Yahoo!’s weaknesses 1. 2. fickle eyeballs glued to its site. One of Yahoo!'s top challenges is to keep young. From its entry to the market. The tagline. for revenue Most of Yahoo!’s revenue came from advertising. They could not generate much the revenue from marketing services. Reliance on U. 2. New ad campaign Yahoo’s newest promotion strategy focuses on a new advertising campaign aimed at younger and hipper users. ‘Do you Yahoo?” produced such a marketing buzz. The company earns 30% of its revenue outside of the U. Global brand recognition Yahoo!’s final strength is its globally recognized brand. 3. Click fraud 9 .S. By doing this. it will strengthen the social base of the company and boost additional revenue growth for years to come. Additionally all of Yahoo!’s Global properties developed their own flavor of this tagline.bring a lot more revenue for Yahoo. Yahoo! created a very successful brand image. it became a way of life not a question. That is a significant strength. That is a big impact from new software with the complex art and science of running a search engine.S markets and leads it competitors in global revenue growth.

10 . video portals have started to become one of the new gems of the Internet. Europe. 2.What’s weakening Yahoo! even more is the ensuing battle with click fraud. 1. Yahoo! Opportunities Yahoo! has been investing in its future since the 2001 when the “dot com” bubble burst. A hinted acquisition by Microsoft There have been a number of rumors floating around that Microsoft might attempt to acquire Yahoo! One of Microsoft's major reasons for a possible acquisition is that MSN lags behind both Yahoo! and Google in search. This will cause the business who suffers by these click fraud select their advertiser that protects their investments and sue those that do not. Partnerships Yahoo! has been partner-shipped with several big companies such as HewlettPackard Co (HP). This might attract more consumers in Asia Pacific. The number of new customers will grow and increase Yahoo!’s global foothold and financial status. North America and South America. Yahoo! Threats 1. Click fraud represents a tremendous weakness to Yahoo! and its future financial growth potential. Online video chatting As social portals loose their luster. Yahoo!’s purchase of JumpCut in September 2006 should leverage the company for the advancement.

Partnerships with several big companies. 3. Reliance on U. has many more auxiliary products compared to the competitors. Legal threats 3. 5. Yahoo! Inc. Google search results generate twice as much revenue as Yahoo!. Yahoo!’s new ad campaign 3. Microsoft THREATS 1. Yahoo! is ranked 5th in visitors among video sites. The 2006 acquisition of WebJay. a music-sharing site.2. Yahoo!’s purchase of Flickr. A prospective acquisition by 2. Click fraud 3. while YouTube. has beaten Google in the mobile market 6. WEAKNESSES 1. 4. Table 1 SWOT Analysis STRENGTHS 1. video copyright infringements from its video site. Which is owned by Google is ranked 1st. Online video editing and the Yahoo!’s purchase of JumpCut. OPPORTUNITIES 1. for revenue 2. pending click fraud lawsuits. Increased revenue from global markets 4. Legal threats The probable lawsuits from a number of Yahoo! properties can erode future earnings and the company’s image. 2. Advertising revenue is failing due to Google and other competitors in the market. Yahoo!’s new search logarithm 2. 11 . Consumer attitudes towards online advertising may become more negative. Yahoo! Inc.S. Global and strong brand recognition 5. and conflict of interest lawsuits in global markets all pose a significant threat to the company and future growth potential.

and advertising. Yahoo! should take another look and care of its customers to the completest. After all. Yahoo! must remain conscious of significant weaknesses and threats it faces in the current environment and the future environment. Customers Focus Strategy: Customer segmentation is absolutely essential for many businesses to success around the world. surviving Internet information services company and global advertising agency. possibly with one of the company’s competitors. Increasing strength of competitors. Yahoo! should design their marketing plan to focus on the search. Conclusion and Recommended Strategies According to the analysis of Yahoo. Social websites such as MySpace and FaceBook are now breaking into the online advertising market. information services. Their satisfaction promises returns. it should become more customer-focused.4. 3. the company must exercise 12 . 5. Globalization: Yet with all strengths and opportunities. For Yahoo Company to capture the growth of the internet. strong. 2. customers are the bread and butter of any business. Yahoo! should position themselves as a global. Also. Merger and acquisition: Merger or acquisition could be an opportunity to the company. 1. Although many equate Yahoo! with only search. Yahoo may focus on some key points as follows. and also address the growing concern it faces from its competitors.

advance. This strategic functional organizational structure provides Yahoo with a competitive advantage over centralized organizational structures in the same industry. 5. and technology group. products or customers. Furthermore. as it help businesses to seek continuous improvement in products. community. expand.extreme caution and speed up negotiation. 4. Competition should be used for Yahoo! as a strategic opportunity to develop. And Yahoo! should diversify its sources of revenue and break away from the dominance of advertising. Strategic Organizational Structure: The Company’s structure should depend on the company’s business strategy. The structure should not depend upon geography. advertising and publisher group. Any merger or acquisition must be profitable and provide advantages for the company in the short and long run. an extensive internal and external assessment must be carried out at both companies. Competition: Usually competition is a threat for the company but instead company should look at it as opportunity. and mature in this competitive market by using modern technology. In addition. The results must be carefully analyzed and only then the appropriate action taken. Competition always works as a motive for the business. Yahoo! should implement "Open Door Policy" to allow an open line between groups and top management instead of top-down approach which slow the process of decision making. 13 . and society as a whole. and services. It should depend upon what is best for the organization. The structure of Yahoo! is divided into three groups: audience group.

Reliance on U.   Opportunities (O) 1. Develop partnership with security software corporations to . New Ad campaign 3. Use S1. 3. Merge W1 with O1 to create new market opportunities. Increase Flickr’s capabilities in order to reverse the decline in image search on Yahoo! 4. has beaten Google in the mobile market 6. Use internet video advertising boom to strengthen Yahoo! Video sites. Partnerships 2. Use Flickr as a tool to developing a better video site. 14 WO Strategies 1. Online video chatting 3.S for revenue 2. 4. Click Fraud 3. 4. Increased revenue from global markets 4. 5.Table 2 TOWS Matrix   External Factors Internal Factors Strengths (S) 1. Possess Flickr SO Strategies 1. has many more auxiliary products compared to the competitors Weakness (W) 1. Advertising revenue is failing. Use Flickr as a new means of advertising for the partnerships with VISA or NFL. Yahoo! Inc. Yahoo! Inc.S3. 5. Google search results generate twice as much revenue as Yahoo!. Use Yahoo!’s current expanded market to target advertisers in the foreign countries.S2.S4 to develop partnership and online gaming. 3. Remodel the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo! 2. New search algorithm 2. Yahoo! is ranked 5th in visitors among video sites. 2. Global brand recognition 5.

4. They also must concentrate their efforts on upgrading and advancing their target advertising capabilities. 2. 3. O1) Threats (T) 1. S2 to remain profitable in order to avoid acquisition tendencies. Increasing competitors 5. 15 . Use Yahoo! Brand recognition to build a social website through Yahoo! Inc. Prospective acquisition by Microsoft 2. it seems to be in the company’s best interest to pursue a strategy that focuses on increasing their advertising revenues. In developing a strategy for Yahoo!. After developing the SWOT matrix. Increase advertising for Yahoo! and its partnerships with NFL to promote searches on Yahoo! 2. Use Yahoo!’s brand recognition 1. Establish good working partnership with other players in the industry to avoid harsh competitions. Social websites are breaking into the online advertising market. Yahoo!’s most predominant strength is their brand recognition. search engine to increase users.(O1&O2) combat this menace. Consumer attitudes 4. Avoid violating set rules and laws to prevent legal litigations. (W2 vs. Legal threats 3. Use S1. the company should use their strong brand recognition to entice more advertisers for their site. ST Strategies WT Strategies 1.

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