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Yahoo strategic analysis

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Executive summary

The report is based on the internal and the external analysis of Yahoo. The report also has
discussed regarding the key strategic challenges that the company is facing at present. The
different models such as Porter’s five force analysis, SWOT analysis, Pastel analysis, VRIN
framework, TOWS matrix, benchmarking, the strategic cock, and the Ansoff matrix along with
the discussion regarding the SAFE criteria have been described to analyse the current situation of
the company. The opportunities also have been mentioned so that the company will be able to
compete in the global market with its competitors. The analysis with the help of the different
models have been highlighted the issue that fundraising is the critical issue for the financial
position of the company; thecompany only focuses as the search engine. But, it is required to
create the strong platform regarding the advertisement so that it will be able to compete with the
others. The strength of the company is required to be utilised so that the weakness can be
minimalized. Three options have been referred to the company t deal with the strategic problems,
Out of the three options, the option for the development of the new mobile apps as the search
engine in the mobiles so wins the long term role. As the contingency plan, the development of
the advertisement platform has been referred as the fundraising platform.

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Table of Contents

Executive summary......................................................................................................................... 2

1. Introduction to the company: ...................................................................................................... 4

2. Internal environment analysis:................................................................................................. 5

2.1 Resources and capabilities: .............................................................................................. 5

2.2 VRIN framework .................................................................................................................. 7

2.3 Strength and weaknesses....................................................................................................... 8

3 External environment analysis ................................................................................................... 10

3.1 Pestel analysis ..................................................................................................................... 10

3.2 Porter’s 5 forces .................................................................................................................. 11

3.3 Competitor benchmarking .................................................................................................. 12

3.4 strategy clock ...................................................................................................................... 14

4. Strategic challenges for the firm ............................................................................................... 14

5. Evaluation of future strategic options ....................................................................................... 15

5.1 SWOT analysis ................................................................................................................... 15

5.2 Ansoff Matrix...................................................................................................................... 17

5.3 Strategic options.................................................................................................................. 18

5.4 SAFe criteria ....................................................................................................................... 18

6. Recommendation ...................................................................................................................... 19

6.1 Strategic direction ............................................................................................................... 19

6.2 Contingency plan ................................................................................................................ 19

References ..................................................................................................................................... 20

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1. Introduction to the company:

Yahoo Inc is the American based multinational technology company. The headquarter of the
company is in California. The key product that has been offered by the company is the web
portal which is the search engine widely used by the global market. The other services and the
products are Yahoo Directory, Yahoo News, Yahoo Finance, Yahoo Answers. The others are
anadvertisement, online mapping, fantasy sports, video sharing, and others. The social media
service also is offered by the company. It is the most popular search engine in the United States
market. The Yahoo Inc has been founded in the year 1994 by Jerry and David’s Guide(Yahoo,
2016). In January 2015, it has announced tospin – off its stake in Alibaba as the separately listed
company. The expansion history of the company is quite impressive. In the year 2008, the
Microsoft Corporation had the unsolicited bid to acquire Yahoo, but Yahoo had rejected the bid
ad announced the less requirement of their shareholders. After that in the year 2011, Yahoo had
the market capitalization of US$22.24billion. Very recently, the have announced the partnership
with Yelp. Inc(Yahoo, 2016). On 21stNovember 2014, they also have acquired Cool iris. Apart
from the mentioned products and services, the other products are Geo planet, Yahoo next, Yahoo
BOSS, Yahoo Meme and otters. The major challenge that is being faced by the company is the
latest Turnaround plan by the company. The conflicts with the CEO Marissa Mayer is another
internal problem of the company as she wish to cut the 15 percent employee base to maintain the
cost effectiveness of the company(Techinsider, 2016).

In the current assignment, the strategic analysis of the Yahoo will be discussed. The competitive
framework and the important strategies based on the internal and the external analysis of the
company are the key discussion area. After the effective strategic analysis, the proper
recommendations also will be offered to the company for the maintenance of the sustainability
fact in the company.

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2. Internal environment analysis:

2.1 Resources and capabilities:

Resources Capabilities

Healthy financial resources • Invest in other companies,e.g.,

Alibaba
• Invest in new services
• Acquire new start-ups

Good brand name  Gives them ability to charge high

prices for advertising
 Wide coverage of the most
geographical is the global
market(Yahoo, 2016)

Tangible resources  Financial cost cut by the CEO

 Physical Cubicles
 Strong organisation structure to
maintain the transparency with the
employees
 The technological advancement I
term of the Inktomi search engine,
Yellow pages, Hot jobs, and
others(Yahoo, 2014)

Capabilities of the organisation  Differentiation and the focus on

the need of the customers
 Services are updated as per the
need of the customers
 Brand identity already established
in the market is another capability
of the company due to the wide
range of the products and the
services offered to the global

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 customers(Yahoo, 2016)
 The high reputation of the
company in the market
 Establishment of the digital theme
park is another capability of the
Organisation and used as the
effective resource

Intangible resources  The continuous innovation and

creativity are the important
intangible resources
 The strong research and
development for the effective
implementation of the market
research is another resource of the
company
 In the year 2011, there were
14,100 employees of the company
which has been reduced to 10,400
by the year 2015, but still, the
strong workforce is capable of
achieving the success year on year
in an efficient manner(Statista,
2015)

Human – Semel’s deal-making skill  The perfect acquisition and the

merger using the deal making
skills can increase the revenue of
the company(Businessinsider,
2011)

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2.2 VRIN framework

Capabilities V R I O

Recognised Brand Name

Experienced in mergers and acquisitions eg Alibaba

A popular search engine for research

Good prices for the revenue generation and also for the
customers

Accumulation of the large amount of Global data

Continuous innovation

Enough manpower for the excellent social networking

experience

Strong advertisement values

Strong partnership

Accumulation of a large amount of data is the most important section of the competitive
advantage of the company(Yahoo, 2014). The company also use to keep of targeting the
excellent manpower so that the innovation process can be continued and the disruptive products
can be offered to the customers of the global market. The company efficiently handles the
transformation of the data to the most useful data. The data that is handled by the company is
inimitable. On the other hand, the merger and the acquisition capability of the company also are
arare feature. The advantages of the merged and the acquired companies are also getting mixed
with the competencies of Yahoo. These mixed strategies are quite capable of maintaining the
strong competitive advantage for the company. The partnership approach is another positive
aspect of the company.

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2.3 Strength and weaknesses

The strength and weaknesses of the companyhavebeen mentioned as below:

Strength Weakness

• Strong brand name

• Poor or weak research and
• It famous and widely recognised development department
• It’s a secure business(never been • Dwindling users and revenue
hacked)
• Financial problems(Yahoo,
• Motivated and well remunerated 2014)
employees(Yahoo, 2016)

The key weakness of the company is the poor performance of the R & D department of the
company. As a result, Google and the Bing are above in the ranking scale of the search engine in
the global market. Though the reputation of the company is quite strong due to already
established brand name but the company is lagging behind regarding the fulfilment of the need
and demand of the customers. The financial condition of the company also is not good as it has
entered into the media company and unable to raise the fund. Google and Facebook are not only
the media company, but they are quite capable of selling the advertisements to raise the fund. So,
it is required to make the financial condition strong. It is required by the company to create the
advertisement products anda good platform for that rather than creating the content only(Fortune,
2016). So other than the media company it is required to introduce the advertisement company as
well.

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Figure 1: Financial condition of Yahoo

Source: (Latimes, 2016)

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3 External environment analysis

3.1 Pestel Analysis

• Yahoo is currently blocked in China, this means that it cannot access a third of the world population
• Yahoo and other internet companies are facing increasing regulation around the world for example in the
Political and EU were companies are required to notify users if they are following them using cookies.
legal

• Global recession caused by slowing down of the BRICS and low energy prices
• Low interest rates
• E Marketers have estimated the sepnding on the digital advertisement of $55.25 by the end of the year
Economic 2016

• Societal change due to change uin taste. People are writing less emails and using more of chats
• The U.S mobile spending is likley to raise by $12 bilion by 2016
Social • The eployment rate has been decreased

• Rapid change in the technology in the global market

• Data storage and porcessing
• new technologies for the innovation
Technology • Technology to support teh day to day business
• Introducion of the Yahoo Smart TV

Based on the above analysis, it is evident that Yahoo can attract the more talent pool for the
sustainability of the innovation. The number of the employees of the company in the year 2015
has been drastically minimized as the CEO of the company has been planned to cut the cost 15
percent by minimizing the workforce(Techinsider, 2016). But, to maintain the innovation and the
proper usage of the technology as per the recent glob market, it is important to recruit more
people. As Yahoo is currently blocked in China due to the Geopolitical issues, they have the
fewer chances to target the largest population(Yahoo, 2013). Due to the economic instability, the
sales of the premium products is likely to get reduced due to the low disposal income of the
population. The increase in the demand of the customers regarding the different apps also is the
great opportunity of the company. In this aspect, the Yahoo smart TCV is the most important
example. As a part of the CSR activities, the company is closely associated with the energy
consumption policy to attract the customers.
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3.2 Porter’s five forces

Force Rating Description

Threat of entry Medium Many new companies are coming up in the

market as people are becoming the internet
associated. But, it is not easy to imitate the
innovative idea that Yahoo has to compete
with them(Yahoo, 2013).

Threat of High With the technological development, the

substitutes people are using the mobile and Tablets to
search any information rather than the
desktop. So, it is required by the company o
use the innovative idea to shift the focus to
them(Yahoo, 2013).

Bargaining power High With the enhanced substitutes products and

of buyers websites in the market offering the same
information, the customers are most willing
to go for the less costly products to search
for the information rather than purchasing
the Yahoo products. If they will buy, it is as
per their wish and loyalty but, with the
introduction of the new websites, the
bargaining power is increasing.

Bargaining power Medium With the excellent merger and acquisition

of suppliers with more than 67 mergers in the last five
years, they can manage the great amount of
the suppliers(Yahoo, 2014).

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Rivalry among High Yahoo is associated with the operations such
competitors as internet product- services and with the
content. There are many players such as
Google, Bing, Facebook those are closely
fighting for the accumulation and the
protection of the data. The market is
completely under the control ofGoogle and
Facebook. Google has the highest market
share of 66.7 percent in December
2012(Google, 2012).

With the medium rated bargaining power of the suppliers and the possibility for the new entrants,
the company can rise once again with the excellent hiring of the talent pool.

3.3 Competitor benchmarking

Companies Yahoo Google Facebo Bing

ok

Benchmarks

Unique visitors per month 750,000,0 1,200,000, 900,00 285,000,

00(Yahoo, 000 0,000 000
2016)

Database MySQL, Big Table, MySQ Microsof

PostgreSQ Maria DB L t SQL
L(Yahoo,
2016)

Company valuation $30.74bn $535bn $337bn $38bn

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Number of members 12,500 at 12,691
2015 at 2015

Free solutions

Marketing solutions

Best in class service

Widely recognized brand

User engagement and long time

spent on site

Strong mobile technologies

The engagement of the users is not strong for the company as the customers use to move to the
different mobile application for the user friendliness. So, it is required by the company to use
their innovative ideas for the introduction of the new product and the new service so that more
customers will be attracted towards them.

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3.4 strategy clock

Strategy clock

Bing

Yahoo
value

Facebook

Google

Price
Differentiation strategies Non competitive strategies Low price strategies Hybrid strategies

As per the strategy clock, Yahoo is at the 12 o’ clock position. They are widely using the
differentiation strategy as Bing. But, Bing is the new player in the market. To sustain in the
market, Yahoo is required to use the innovation process so that the will be able to deliver the
required product as per the need of the customer rather than using the premium products for the
company. At the same time, the advertisement platform is required to be establishedthrough
Yahoo to maintain the sustainability fact in the global market.

4. Strategic challenges for the firm

After the proper internet and the external analysis, the following strategic challenges can be
highlighted:

 It is the great challenge for the company to bring the innovation. To take the step, it is
required to attract and recruit more talent tool so that innovation process can be
continued.

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  The threat of the substitute products and the threat from the competitors are also the key
challenge that the company face(Yahoo, 2013).
 Increasing the number of the employees to bring the success is another great challenge as
the company is focusing on the cost cutting with the help of the reduction in number of
employees
 Raising the fund with the existing products also is the great challenge that Yahoo is
facing at present
 Expansion of the business in the China market is also importantchallenge that the
company is facing for the government rules and regulations.

5. Evaluation of future strategic options

5.1 SWOT analysis

Strength Weaknesses

• strong brand name the global market • The image search of the company is
declining each and every year by 3
• Powerful partnership in business
percent(Yahoo, 2013).
with MLB, VISA, and NFL(Yahoo,
2013) • The company is not focusing on the
advertisement concept so that the
• International presence in business
revenue is reducing.
• The large capability to accumulate
• Less focus on the vertical
the data required
integration so that they will be able

• The efficient E – commerce to control the suppliers for the

enterprise coordination of the operation.

• Easily accessible • The company has the low market

share for the mobile application.
• Widerange of products and services
as per the need and demand of the

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 customers in the market

Opportunities Threats

• Opportunity for the establishment of  The threat from the competitors

the mobile application.  The threat from the political barrier
• Opportunity for the advertisement so that the company has been
platform. restricted to enter China.
• Diversification in its services to  Large range of the substitutes is
penetrate the new market by another set of threat factor to the
satisfying the customers. company.
• The broadband extension is another  The key competitor is
important opportunity that the Google(Yahoo, 2013).
company has.  The reduction in the number of the
• The strategic alliances are another employees is not supporting the
important opportunity that the continuous innovation as per the
company has. demand of the market.

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5.2 Ansoff Matrix

Market penetration New products and services

The increase in the promotional activities The introduction of the new products in
with the drop down menu in DHTML and the product category to the company is
other category tabs have helped the the added advantage for Yahoo. In the
company to slowly reran its position in a year 2014, CEO of the company has
broad manner. It also has improved the newly introduced few new products
engagement of the users with the website which are likely to compare with the
due to the user-friendly approach. predictive search technology of Google
for the smartphones(Yahoo, 2014). With
the help of this approach, the company
can sustain in the existing market.

Market development Conglomerate diversification

With the help of the new mobile The merger and acquisition are likely to
developer the company is likely to help the company to get the large talent
expand more in another untouched area, pool for the continuous innovation
and also to penetrate the China market process. So that they will be able to
where the were restricted by the political compete with the competitors in the new
barrier.It has been estimated that the U.S market.
mobile advertisement will reach by $40
billion by the end of the year 2019
(Forbes, 2015).

To capitalize on the trend of the mobile advertisement, Yahoo has launched the unique market
place for the effective mobile search and also for the efficient display advertisement. Yahoo is
expecting to increase the display ad revenues to the limit of $1.8 billion and at the same time the
search to increase by the amount of $1.6 billion by the end of the year 2010 (Forbes, 2015). Also,

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the strong merger and acquisition with the strong partnership are likely to attract the new talent
pool for the continuation of the innovation process to increase the base of the loyal customers.

5.3 Strategic Options

There are three options that the company uses to focus on the strategic options. They are as
below:

Option 1: Option 2: Option 3:

development of the
more merger and More application as
new products
acquisition per the mobile Aps

These are the three options that have been offered to Yahoo so that they will be able to meet the
strategic challenges faced by the company. With the help of the merger and acquisition, the
company will be able to attract more talent pool for the continuous innovation process. The
approach of the development of the new products as they are focusing currently, the will be able
to compete with their key competitors such as Google, Facebook, and others. On the other hand,
with the help of the introduction of more mobile application, the company will be able to expand
in the new market as per the Ansoff Matrix. The approach of the market development has been
focused here other than the market penetration for the better return by targeting the diversified
market.

5.4 SAFe criteria

Option 1 Option 2 Option 3

Suitability

Acceptability

Feasibility

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As per the SAFe criteria, the option 1, is suitable, feasible, but not acceptable. The rate of return
or the profit amount is likely to be less as the maintenance of the addition of the manpower is
likely to increase the cost to the company. The option 2 is suitable and acceptable for the
stakeholders but not feasible as the demand for the mobile application is higher in the global
market. Option 3 is likely to meet all the criteria regarding the suitability, acceptability, and the
feasibility. All the requirement and the need of the stakeholders are likely to be met with the help
of the introduction of the new mobile application. The requirement of the customers will get
fulfilled, and as well the need of eh other shareholders with the increase in the revenue also is
going to be met.

6. Recommendation

6.1 Strategic direction

It is recommended that Yahoo should focus on the development of the new mobile apps like
Google and Facebook so that they will be able to gain the popularity of them. The loyal customer
base also will be increased with this new step of the company. With the short term win, the
company also will be able to gain the long term win.

6.2 Contingency Plan

If the company will face the cost related problem regarding the development of the new mobile
applications as the effective search engine, then it is required by the company for the
establishment of the advertisement platform as well. So, the fund will be raised in this activity
will be used for the development of the mobile applications for the long term win.

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References

1. Businessinsider, 2011. How Yahoo Blew It. [Online]

Available at: http://www.businessinsider.com/facebook-is-selling-just-4-of-the-company-
for-2x-as-much-as-yahoo-could-have-paid-to-buy-the-whole-thing-2011-1?IR=T
[Accessed 27 April 2016].

2. Forbes, 2015. Yahoo's Strategy Behind Launch Of New Mobile Developer Suite. [Online]
Available at: http://www.forbes.com/sites/greatspeculations/2015/02/26/yahoos-strategy-
behind-launch-of-new-mobile-developer-suite/#1c607df72c7c
[Accessed 27 April 2016].

3. Fortune, 2016. Yahoo's Worst Problem? It's a Media Company. [Online]

Available at: http://fortune.com/2016/02/03/yahoo-turnaround-2/
[Accessed 26 April 2016].

4. Google, 2012. Annual report, U.S: Google.

5. Latimes, 2016. Is Yahoo dead? Or: How do you solve a problem like Marissa?. [Online]
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column.html
[Accessed 26 April 2016].

6. Statista, 2015. Number of full-time Yahoo employees from 2007 to 2015. [Online]
Available at: http://www.statista.com/statistics/260291/number-of-full-time-yahoo-
employees/
[Accessed 26 April 2016].

7. Techinsider, 2016. The rise and fall of Marissa Mayer, the once beloved CEO of Yahoo.
[Online]
Available at: http://www.techinsider.io/yahoo-marissa-mayer-rise-and-fall-2016-1
[Accessed 27 April 2016].

8. Yahoo, 2013. Annual report, United States: Yahoo.

9. Yahoo, 2014. Annual report, U.S: Yahoo.

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 10. Yahoo, 2016. About us. [Online]
Available at: https://about.yahoo.com/
[Accessed 27 April 2016].

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