External Assessment

In the company’s assessment, the External Factor Evaluation (EFE) matrix and the Competitive Profile Matrix (CPM) will be used to ascertain its external position. The EFE matrix is most effective in the assessment of current business conditions and is thus helpful in providing the current business scenario. Indeed, the EFE matrix, in its application is important in prioritizing and visualizing the threats and opportunities that Yahoo Company is facing. On the other hand, the CPM gives an idea of the relative position of the company by comparing it with its competitors. In respect, therefore, the matrix helps in revealing the company’s relative strengths and weaknesses. The two matrices will be used together in painting the correct picture of the company’s performance relative to its competitors.

EFE matrix

External Factors	Weight			Rating	Weighted Score
Opportunities
The advertising revenues in the US are still strong at over $28 billion in 2014	0.08			3	0.24
Developing and emerging countries have improved economic status thus their companies can commit more dollars in internet advertising	0.07			2	0.14
The number of internet users around the world has surpassed the 2 billion mark and is set to increase	0.1			4	1.4
Most companies in the world have identified internet advertising to be cheaper and highly responsive	0.09			3	0.27
Internet based businesses are highly dependent on innovativeness in technology	0.07			2	0.14
There is an increase in new business strategies such as the combination of voice and video services in internet access	0.09			2	0.18
Increased time in the internet among consumers		0.08	3		0.24
Threats
The viability of existing business in internet field is reduced by low entry barrier		0.06	2		0.12
Internet based companies have suffered from weak economic conditions		0.09	3		0.27
The constant technology changes make it difficult to keep up to date		0.08	2		0.16
There is a rise in the number of internet based businesses that have continually reported disappointing financial results		0.07	2		0.14
Competition is bound to be stronger owing to consolidations among the internet based providers		0.05	2		0.1
Anticipated low profits and high expenses in the future resulting from changes in legislative requirements on patent rights and information security and technology sharing		0.07	3		0.21
Total		1.00			2.61

 

Competitive Profile Matrix

			Yahoo		Google		MSN
Critical Success Factors	Weight		Rating	Score	Rating	Score	Rating		Score
Advertising	0.15		3	0.45	4	0.60	3		0.45
Market Share	0.10		3	0.30	4	0.40	2		0.20
Customer Loyalty	0.15		4	0.60	4	0.60	3		0.45
Strong Brand Recognition	0.15		4	0.60	4	0.60	4		0.60
International markets	0.20		4	0.80	2	0.40	3		0.60
Talented Employee Base	0.10		3	0.30	4	0.40	3		0.30
Powerful Business Relationships	0.05	3		0.15	3	0.15		4	0.20
Culture of Innovation and Accountability	0.10	2		0.20	4	0.40		4	0.40
Total	1.00			3.40		3.55			3.2

 

According to the CPM, Yahoo Company weigh international markets to be the most important critical success factor at a value of 0.20. Indeed, the company’s score on the item has the largest difference compared to the two main rivals of Google and MSN. The development can be translated to mean that it has the biggest competitive advantage in the same field of internet market. Just behind the number one spot is strong brand recognition which attracts a weight of 0.15 which is an equally high level of importance. The maintenance of strong brand recognition is a tested parameter in the retention of market share. In truth, this fact is evidenced by the high score that the item scores in the industry across the three competing organizations in the matrix. Equally high on the item list is the customer loyalty factor which weighs a relatively high 0.15 score. In this measure, Yahoo remains second to Google but still remains ahead of MSN.

In terms of advertising, the relevant factor weight of 0.15 puts Yahoo and MSN at the same level with Google leading in the same. In similar fashion, talented employee base weight of 0.10 rates yahoo and MSN similarly, both of which lag behind Google. Still, Yahoo ranks relatively lower that Google and MSN on the culture and innovation factor. In this factor, yahoo’s rank does not equal a very high level of ranking but is still important in providing important information about the competitors on the CPM. It is also quite surprising that Yahoo ranks the lowest in this factor behind both MSN and Google. In terms of market share, Yahoo ranks at an impressive second position behind Google and in front of MSN. In the business relationship factor, MSN takes an unprecedented lead   while yahoo and Google take on a tie in the second position.

Competitive Analysis

That yahoo admits to having embraced competition for the betterment of the industry is in itself a bold step. The company admits that it competes to attract users to their websites while luring advertisers to their marketing services. The primary competitors have been identified as Google and MSN with all of them competing in the industry of internet information provision (Whitney, 2007). In terms of competition, it is imperative to identify the fact that each of the rival companies differ in their primary company beliefs. These beliefs are clearly outlined in the mission statements of the respective companies with each having distinct goals and values. In respect of this, therefore, each company is aligned to providing solutions to its distinct customer niche making them unique in their product offering. This section outlines the different strengths and weaknesses of the rival companies with a view at ascertaining the level of competition in the industry.

Despite the three competitors having their services in the same sector in terms of investment, they all have their products defined separately. In fact, the fact that they serve the same target markets does not compromise the uniqueness of their products. By extension, the definition of products does affect the manner in which the companies align their business model. Google for instance, delves into its advertiser network with the dominant products of Adsense and Adwords collectively forming the Google Network. The combination of the two service products by Google provide the company with about 99% of its revenue (Hof, 2006). In addition, the revenue can effectively be divided between the 18% which is sourced from onsite adverts and the 81% that is attained from offsite advertisements. Adwords is an online application that helps businesses to put up their ads on the many websites that participate in the Google Network. In contrast, Adsense is a destination for site owners and publishers that have ad space on their websites. Google acts as a middleman by providing payment to webmasters every time a user clicks on a Google ad on their sites.

Yahoo, on the other hand, takes on a different approach to the system despite targeting the same market as Google (Angel, 2012). The website is the most trafficked on the planet and it sells ads for its own network of sites. In so doing, the company considers itself as a meeting point for people to connect with their passions while making money from the same. Its ad network has continually proven to be highly effective on the intelligent ad serving front. The algorithm is packaged in such a manner that it can ascertain the location of the user thus customizing ads based on the location tendencies and other specified parameters. For example, a user gets a car advertisement in Yahoo Money after looking at a car in Yahoo Autos. The beauty of the network is that it stores the data for an indefinite amount of time making random car ads even after three months.

The company has only recently launched its yahoo publisher network which is fashioned to compete with Adwords and Adsense (Baker, 2010). The product allows the same functionality as provided by the Google Network but has lagged behind due to lack of progress from beta. In fact, Yahoo has not yet solidified its place in the market regarding the advertising software. Yahoo services play an important role in luring and maintaining users to its websites for a relatively long period. In contrast, Google recognizes search as their primary objective leading to advancements in the provision of the search product over the recent past.

Positioning Map

SWOT Matrix

Strengths

1. Yahoo has several auxiliary products as compared to the rival companies.
2. The company’s websites and services are readily available to anyone who has internet access thus making its target market very large.
3. The company boasts of highly strong brand recognition as evidenced by its scores in the CPM.
4. Partnerships with companies such as VISA, NFL and MLB provide a strong point for the company.
5. Yahoo has beaten Google, one of its key rivals, in the mobile market.

Weaknesses

1. The company’s image search has continually declined with regular annual drops of 3%.
2. The entry of Google and other competitors has eaten into the company’s revenue leading to a fall in the revenue streams.
3. The company is ranked at number five in terms of video views. The video market is dominated by Google through its YouTube partner company.
4. The revenue generated from yahoo search results is half the amount generated from Google.

Opportunities

1. The existence of a strong talented workforce at the company presents an opportunity for growth and innovation.
2. The purchase of Flickr by the company is an opportunity for growth.
3. The company has penetrated unique markets that have not been tapped by other rival companies.
4. There is increased opportunity for internet marketing revenue with anticipated increase in the number and frequency of such adverts.
5. Broadband expansion presents another opportunity for the company.

Threats

1. Google, despite it being new in the market, has been touted to surpass yahoo in revenue generation.
2. Over the next few years, the attitude of consumers towards online advertisement is anticipated to become negative.
3. One of the company’s competitors, Google, commands over 50% of the entire online searches as compared to Yahoo’s meager 24% control.
4. There is an increased strength in the company’s competitors posing a further threat to the company.
5. The online advertisement market is now flooded with the entry of social websites such as Facebook and MySpace.

 

Opportunity Strategies

1. The company can use its expansion to market its products to potential advertisers in other countries.
2. Yahoo should revamp the current video site through the encouragement of onsite advertisement by focusing on its strong brand recognition.
3. The company can also exploit the partnerships with VISA by using Flickr as a potential means of online advertisements.
4. Yahoo can also increase Flickr’s capabilities thus cushioning the company against the decline in image searches.
5. Strengthening of the company’s video sites is important at a time when video advertising has hit a boom.
6. The company should use Flickr in the development of a better video site.

 

Threat Strategies

1. The company should increase advertising for its search engines in order to improve its number of users
2. Promotion of searches on Yahoo is paramount and can be achieved through its partnerships with MLB and VISA.
3. The company should also focus on development of a social website through its strong brand recognition.

 

The SWOT analysis proves that the company should implement key strategies in order to retain its glory. It is therefore in the company’s best interest to focus its strategy on the increase of its advertising revenues. Indeed, such a strategy should be built around the company’s strength in brand recognition. This source of strength can be used on the development of a strategy to lure more advertisers to the company’s sites. In addition, the company should focus its efforts on the advancement and upgrading of its target advertising capabilities.

 

Internal Assessment

Internal factor Evaluation (IFE) Matrix

Key Internal Factors	Weight	Rating	Weighted Score
Strengths
Yahoo generates additional revenue through its range of premium services and is not dependent on advertising fees alone.	0.09	3	0.27
Yahoo has a number of revenue generating segments in internet based services including Search, Display Related and Email	0.08	4	0.32
The company is the second leading global internet brand	0.1	4	0.4
The company continues to experience increased revenue over the years, albeit small	0.07	2	0.14
The company has a quick ratio of 2.78 that is above the average in the industry	0.1	4	0.4
Yahoo also offers internet access through third party entities besides offering online properties and advertising	0.07	4	0.28
Anticipated increase in profitability due to layoffs	0.06	4	0.24
Weaknesses
The company continues to increase its capital lease and other long term liabilities	0.08	2	0.16
Continued net income decreases over time	0.08	2	0.16
Attempted acquisition of the company by Microsoft	0.09	2	0.18
The company has closed several of its video properties and intends to close even more	0.08	2	0.16
Overall decreases in advertising revenue since 2009	0.1	2	0.2
Total	1.00		2.91

 

Financial Ratio Analysis

Price Ratios	Yahoo	Industry	S&P 500
Net income (YTD vs YTD)	-55.30	13.20	-8.10
Sales (5-Year Annual Avg.)	34.71	69.97	12.97
Dividends (5-year Annual Avg.)	NA	NA	11.88
Sales (Qtr vs year ago qtr)	-11.80	7.60	-5.20
Net Income (Qtr vs year ago qtr)	242.70	46.30	24.70
Net Income (5-Year Annual Avg.)	12.27	87.09	12.30

 

Financial Condition	Yahoo	Industry	S&P 500
Current Ratio	3.4	9.7	1.5
Debt/Equity Ratio	0.01	0.01	1.11
Quick Ratio	3.4	9.7	1.2
Leverage Ratio	1.2	1.1	3.5
Book Value/Share	8.69	85.16	21.58
Interest Coverage	NA	0.0	27.2

 

Profit margins %	Yahoo	Industry	S&P 500
Gross Margin	56.3	62.2	38.2
Pre-Max Margin	3.0	27.1	9.9
Net Profit Margin	-1.4	20.6	6.9
5Yr Gross Margin (5-Year Avg.)	59.3	60.7	38.1
5Yr PreTax Margin (5-Year Avg.)	19.6	30.4	16.5
5Yr Net profit Margin (5-Year Avg.)	11.9	22.9	11.5

 

Strategic Issue and Implementation

The different analysis tools in this study point to a problem in Yahoo’s category of search. However, the company has been cited on numerous occasions as seeing itself as a portal company whose primary goal is to connect the world with its information. Despite the goal being quite awesome, Yahoo needs to abandon it if it harbors dreams of healing the suffering in its search category. The growth in other categories has blinded the company over time to the effect that the search category became forgotten as the company began to feel content (Blozis & Cohen, 2009). The company’s decision to remain sticky by not embracing flexibility has become its own undoing unlike Google which does not have a sign in feature (Holahan, 2006). In essence, having a sign in feature makes the site more complicated and difficult to use thus working against the retention of its customer.

Yahoo is facing challenges in four areas based around competition from rivals and all related closely to search. Part of the problems facing the company is based on lower revenues due to competitors and Google’s dominance in the search categories of online platform. In addition, the changing face of portals and inefficient search results also plague the progress of the company. The organization needs to realize that its future is dependent on search and intertwined advertising. In effect, the company should first shift their core competencies from a reliance on portal strategy to one that is based on search algorithm. The beauty of such a strategy is that it will enhance its implementation of the advertising strategies that are currently helpful in its revenue generation.

The company, Yahoo, needs to move forward using one core competency of search in the implementation of its new strategy. In so doing, the company requires a concentration of its current resources in the development of an effective algorithm thus aiding in social networks and portal development. The development of such strategies is important in the implementation of a better solution to the problem that plagues the company presently. The company’s ad network will effectively be integrated into the search algorithm thus picking up relevant keywords to link text and content. In addition, the new strategy shall be coupled with webmaster utilization to enhance the benefits of outside publishers through advertising networks. Ultimately, the outside influence will improve the revenue stream for the company in the long term.

 

References

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.

Hof , R. (2006, December 7). Five Steps to Get Yahoo Back on Track. Business Week Online, 10. Retrieved July 15, 2016, from Business Source Elite database

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

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

Baker, L. (2010). Yahoo & Google’s mission statements: Do they connect?. Search Engine Journal, Retrieved from https://www.searchenginejournal.com/yahoo-googles-mission-statements-do-they-connect/4924/

Blozis, D. E., & Cohen, S. (2009). Yahoo income: How anyone of any age, location, and/or background can build a highly profitable online business with Yahoo. Ocala, Fla: Atlantic Pub. Group.

 

 

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