Opening case – Corporate level

strategy
• New Corps CEO Rupert Murdoch has created one
of the four largest and more powerful
entertainment media companies in the World.
• What kind of strategy did he use to create his
media empire?
• Murdoch born in newspaper family, his father
owned and ran the Adelaide News, an Australian
regional newspaper, and when his father died in
1952, Murdoch took control.
• He quickly enlarged the customer base by
acquiring more Australian newspapers.
• He created business model to establish his new
newspaper, the Sun, as a leading British tabloid
(sensationalist journalism).
• He created much return in the media asset than
his competitors.
• This enabled him to borrow increasing amounts
of money, which he used to buy British Sunday
Telegraph and the San Antonio Express.
• Pursuing his sensational business model
further , he launched the National star.
• His growing profits and reputation allowed
him to continue to borrow money and in
1977, he bought the New York Post.
• Four years later in 1981, he engineered a new
coup ( a brilliant and notable success) when
he bought the Times and Sunday Times.
• Murdoch’s strategy of horizontal integration
through mergers allowed him to create one of
the world’s biggest newspaper empires.
• He realized that industries in the entertainment
and media sector can be divided into those that
provide media content or “software”
(newspapers, movies and TV programs) and those
that provide media channels or “hardware”
necessary to bring software to customers ( movie
theaters, TV channels, TV cable and satellite
broadcastings).
• Murdoch decided that he could create the most
profit by becoming involved in both the media
software and hardware industries, that is the
entire value chain of entertainment and media
sector.
• This strategy of vertical integration gave him
control over all the different industries, joined
together like links in a chain that converted inputs
such as stories into finished products like
newspapers, books, TV shows and movies.
• In 1980s, he began purchasing global media
companies in both the software and hardware
stages of the entertainment sector.
• He also launched new venture of his own. In
1983, he launched Sky, the first satellite TV
channel in the United Kingdom.
• He also began a new strategy of horizontal
integration by purchasing Metromedia, which
owned seven stations that reached more than
20% of United States households, he paid $1.5
billion.
• He scored another major coup in 1985 when he
bought Twentieth Century Fox Movie Studios, a
premium content provider. As a result, he had
Fox’s huge film library and its creative talents to
make new films and TV programming.
• In 1986, Murdoch create the FOX broadcasting
company and gained popularity by with
sensational shows like The Simpsons, which was
FOX’s blockbuster program.
• In 1994, FOX purchased the sole rights to
broadcast all NFL games for more than $ 1 billion,
thereby shutting out NBC.
• Murdoch’s business model create the reality
program so popular in the 2000s.
• By 2005, his horizontal and vertical integration
strategy, had created a global media empire. In
2009, his company is still a market leader because
he engineered many new internet acquisitions,
such as MySpace, Rotten Tomatoes and other
popular websites.
• The News Corp story illustrates the use of
corporate level strategy to identify 1) which
businesses and industries a company should
compete in; 2) which value creation activities
it should perform in those businesses ; and 3)
how it should enter or leave businesses or
industries to maximize its long run
profitability.
• In formulating corporate level strategy,
managers must adopt a long term perspective
and consider how changes taking place in an
industry and in its products, technology,
customers and competitors will affect their
company’s current business model and its
future strategies.
• Then the managers decide how to implement
specific corporate level strategies to redefine
their company’s business model to achieve
competitive position in the changing industry
environment. Thus the principle level of
corporate level strategy is to sustain or
promote its competitive advantage and
profitability.
• This unit deals with
• A) Role of corporate strategy in repositioning
and redefining company’s business model
• B) Three corporate level strategies –
horizontal, vertical and strategic outsourcing.
• C) Diversification – entry into new kinds of
market or industries
• D) How different levels of strategy create
successful and profitable business.