Internal Assessment

Internal factor Evaluation (IFE) Matrix

Financial Ratio Analysis

Current Strategy

The complexity of its products and services notwithstanding, Yahoo operates under a relatively simple corporate structure that contains only two main business lines. In the process of generating revenue, the company banks on the provision of marketing services to the business sector through its services and products. In essence therefore, Yahoo achieves revenue by strategically advertising the businesses whenever users of the site click on certain tabs or when they enter certain key words. The company’s products are thus essentially useful in revenue generation through the lines of internet marketing and advertisements. The company relies on its huge online presence in marketing its products to the multinational business companies. Additionally, the high number of users that the company has in its websites is an asset to its business and is one of the main sources of revenue to the company.

Yahoo has a unique business strategy that has set it apart from other companies in similar business. The company earns revenue whenever users click on the links advertised on the sites or when they alternatively view the impressions advertised on the sites. The measurement of Yahoo’s profitability is largely dependent on its unique strategic options including the click-through rate (Angel, 2012). The click through strategy employed by the company is in direct proportion to the number of users that the company has in its database. Ultimately, therefore, the users in the company’s website are the leading asset for yahoo with increases in the number translating to higher profitability in return. The revenues generated from the clicks and views on the company’s websites are classified as marketing services and offer much of the company’s total revenues. In addition to these revenues, the company further attains revenue from established paying relationships with the users for premium services that are classified as fees. However, this fees form a smaller part of the revenue pool for the company forming a meager 12% compared to marketing services which accounts for a staggering 88%.

SWOT Matrix

In the assessment of a company’s strategy, the strengths, weaknesses, opportunities and threats are key indicators. In essence therefore, a SWOT matrix is appropriate in the determination of the most suitable alternative strategies. In this regard, the company must look for solutions that are attractive and that will boost its overall revenue company. The lack of proper technological and innovative growth within the company is a pressing weakness that needs to be addressed in time for profitability to resume. In addition, the changes in the market as reflected by the decrease in the demand for premium services should be scary for the company as it could lead to lower revenues from the same. These developments coupled with the fact that there is a high level of uncertainty regarding the future of revenues based on advertisements should push the management into swift action.

The company can use the strengths it has in overturning the poor performance witnessed in recent years.  In particular, the strong market position is a pointer to the confidence of the company among the users giving it an opportunity to grow even further. Yahoo is also renowned for its comprehensive range of services and products thus diversifying its revenue streams and ensuring stability of the business (Whitney, 2007). Many years of existence for the company have ensured ma strong brand recognition and an eventual long term financial performance. In view of the same, the current performance in the company that can be described as poor is only a distraction that can be ridded off in time. The viability of the company’s products makes them cheaper to introduce and update thus increasing its international business presence in the long run. The strengths identified within the company are critical in the overcoming of the preceding weaknesses.

The company further faces threats to its growth that are largely drawn from the competition in the industry. In essence therefore, a large part of the company’s problems are identified as externally sourced and dependent on the external environment rather than on the internal happenings. However, the company must react internally in order to maintain high profitability in the coming years. Google and MSN are the biggest competitors and pose imminent danger to the company’s prospects in search services. Moreover, the entry of free social networking sites such as Facebook can be identified as threats since they present opportunities for free advertisements for companies. Another threat to the company would be the inexistence of barriers of entry thus opening up the market to potential competition from new companies in the long run. These threats are exponentially increasing with days as regulations governing privacy are diversified and increased.

In facing off the identified threats, Yahoo can depend on the availability of many opportunities for its eventual growth and profitability. In the wake of increased mobile penetration, there is a need for companies to market their services online thus present more business opportunities for Yahoo. Today, the company continues to expand internationally with users based in almost every country of the world. The company has the opportunity of increasing this international presence as well as improving its online retail spending to safeguard its profitability. These opportunities can be grasped through the use of launches and partnerships with relevant companies thus increasing the profitability of the company. Another opportunity that the company should focus on is the movement into mobile technologies to tap into the growing mobile penetration in the developing world. The company’s services should thus be structured around the use of mobile phones and not the traditional computer which is rare in today’s modern world (Angel, 2012). The numerous changes in the internet sector present another opportunity for the diversification of the company’s services to meet the growing needs of users. In addition, the company has the opportunity of improving its technologies particularly in regard to their advertisement targeting and search engines.

Boston Consulting Group Matrix

Strategic Position and Action Evaluation (SPACE) Matrix

Yahoo’s SPACE matrix study reveals that the company has to go through a defensive strategy in overturning the failures that continually face it. In this regard, therefore, the company must fight off competition from other multinationals such as Google and MSN. The interrelatedness of the market within which the competitors thrive makes it very hard for the company to succeed without fighting the competitors. The management must come up with strategies geared towards efficiency and better services if they harbor hopes of attracting more users from competing companies.

Conservative               Aggressive

Defensive                         Competitive

Strategic Alternatives

The analysis done on Yahoo reveals evidence of two main strategic issues facing the company at present. One of the main strategic problems at the company revolves around a necessity to improve the current revenue generation system. In addition to the problem of revenue generation, the company further faces stiff competition for new users of online advertising and search engines. Although the two issues appear to be mutually exclusive, they are in truth overlapping and affect each other simultaneously. The identification of strategic alternatives for the company is thus dependent on, and should revolve around the solution of the two problems. In view of the above, the strategies identified as alternatives aim at stemming competition as well as increasing the revenue for the company to ensure its profitability and long term stability.

One of the alternatives for the company would be focusing on advertisement based revenue system instead of the paid premium services that it currently focuses on. Part of the reason for the failures at Yahoo is the emergence of better and efficient alternatives offered by its main competitor Google. The company should build hope around the fact that it once ruled the internet advertising space before the entry of Google. As thus, the company stands a better chance of revamping its systems since it enjoys a wide internet presence all over the globe (Holahan, 2006). In addition, there are projections that online advertising is set to continue expanding over the coming years thus availing a great opportunity for companies of yahoo’s magnitude. The efficiency of the internet advertising based revenue systems is one of the surest ways through which the company can guarantee its profitability in the coming years. As thus, Yahoo has the option and opportunity of revamping its revenue structure in a swift and efficient fashion.

Besides revamping the revenue system, Yahoo needs to focus on increasing its users and customers because its profitability is highly dependent on the same. The rationale behind this outcome is based on the fact that higher number of users of Yahoo websites would see a transformation in the amount of revenue that the company attains. However, the increment of the number of users is not an easy task but one that is faced by numerous challenges despite presenting equally different options. To achieve this objective, the company should focus on offering increased range of services and products besides the ones it currently offers. Even though yahoo has an opportunity in this regard, it must face off with other competitors such as Google. The company should think of making a killer deal with other popular websites to increase its dominance both in the US and in the entire world. Ideally, the company should borrow a leaf from Google through its acquisition of frequently visited site YouTube.

Evaluation of current organizational structure

Yahoo is currently run through a complex chain of organizational structure comprising of talented and experienced personnel. In fact, the talent pool in the management of the company forms a formidable source of asset that is important in sustaining its growth. At the helm is a CEO, Marissa Mayer, who manages the company with the help of the Co-Founder, David Filo. Still, the CEO is under the direct supervision of the Board of Directors in which she serves as a secretary during their sittings. Under the CEO are several executives responsible for the management of different business lines and departments. For instance, Ken Goldman is currently the Chief Finance Officer with the Chief Development Office being under the leadership of Jacqueline Reses. Other offices in the level work in partnership with these offices in achieving the set objectives of the company.

The current organizational structure at Yahoo is as a result of several changes made in the past by successive managers. Despite these changes, the company has not fully ridded itself from the challenges or solved all its problems. One of the pointers of this failure is seen in the abolishing of the company’s search technology and ad system by outsourcing it to Microsoft. In the deal, Yahoo agreed to pay Microsoft in excess of 12% of its total research revenues as compensation. However, the system failed due to poor and untimely testing of the system thus resulting in continued growth declines. Later, the company changed its organizational structure by reflecting on its core through reorganizations. In 2007, the company failed to capitalize on the new acquisitions such as Flickr even after parting with large sums of money for the same.

Recommendations

The most direct way of matching the competitors in terms of revenue system is through using their success as a benchmark for the development of an efficient system for the company. In a similar way as Google did, yahoo should use their system in coming up with a more efficient and competitive system on the same front. Through the use of Google’s advantage in revenue generation systems, Yahoo can guarantee a reduction in costs of forming another system from scratch. In essence, the company should avoid any forms of wastages including in the process of market research where a lot has been achieved in the past. The poor profitability of the company therefore discourages any efforts of using money on processes where it can be saved.

The company should also cement its partnerships with other strong partners in the internet market to bolster its place in the niche. Today, more sites are opening up that are free for users making the use of premium services less popular. Indeed, the company recognizes the fact that their services might soon be outdated if they fail to take any action. In view of the same, Yahoo should consider buying the new free sites or come up with similar products for their users. The company should borrow a leaf from the New York Times which had adopted a similar approach but later recalled the approach after the rise in free news on the market. The Times, as it is popularly known, was forced to offer more of its content free in the wake of readily available online news. Although Yahoo’s users have been increasing in recent years, the rate of increase has also been reducing owing to competition from free websites.

In a short span of the company’s existence, Yahoo has transformed from being a premier web portal to playing second to a young aggressive competitor. The cause of this failure is in part a lack of realignment and not reacting to changes in the market. In addition, the lack of innovation within the company is also to blame for the poor performance of the company as well as the defeat by other competitors. The company should position itself in a stronger position to cement its place in the internet provision niche of the market with a focus on high speed internet infrastructure. In this regard, the company should target to acquire new companies in the internet provision market to help in its grasp of the new market. Yahoo should also use its high brand recognition as well as international presence to help in the attainment of the objectives set. Ultimately, the company can be sure of victory in the sectors of internet provision as it is a relatively new concept that is worth exploiting.

References

Whitney, D. (2007, February 5). Yahoo Looks to Build Upon Its Strengths. TelevisionWeek, 26, 12. Retrieved March 15, 2007, from Business Source Elite database.

Holahan, C. (2006, December 26). Why Yahoo’s Panama Won’t be Enough. BusinessWeek Online, 9. Retrieved July 15, 2016, from Business Source Elite database.

Angel, K. (2012). Inside Yahoo!: Reinvention and the road ahead. New York: John Wiley & Sons.

 
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