Introduction
The study is based on the Australian Broadcasting Corporation (ABC), which is the public broadcaster. The study has covered about the entire industry analysis in which the company is operating its business. Industry analysis includes analyzing the company on the basis of its various corporate strategies, position of the company in market, various challenges faced by the company, and various ways for mitigating it.
Intent
Current Positioning of firm
In Australia ABC has positioned itself as the leader in the free to air multi channeling, digital radio, digital television, and distributor of audio and video online content. In 2008 ABC combined its business across the radio, television and online which are accounted 72%. In the media environment ABC has maintain its traditional television and radio audiences, and its online audiences are increasing at 3 times rate than the overall internet users in Australia. Audiences of company are increasing as they are providing quantities of visual and audio content that includes programs on television through downloading and streaming.
Purpose of competitive Intelligence
Corporate Strategy
ABC is focused towards the audiences, high quality, innovation, value, efficiency, and responsibility, which are the six goals of the company. As per the corporate strategy of the company the company strives to provide the high quality and innovation for fulfilling the requirements of the audiences.
Revised strategies that engender success
ABC has made no changes in its outcomes or in the program structure, but slight changes has been brought in the resourcing of the programs. The company will provide digital classroom for the national online education portal that will offer library along with digital educational media resources.
Position of company in industry
ABC has strong position in industry as it achieves the large number of audiences. ABC delivers the week’s 7 top television programs which are viewed by adults in age group of 18-49, it has No.1 Scripted show along with Top 2 Freshman Series. The network in growing year after year, in 2011-2012 ABC ranks No.1 according to viewers.
In the 2012, ABC has second largest viewers (7.4 million) and in that 1.9/6 was young adults. In terms of adult viewers ABC compete with NBC by 46% and CBS by 58%, which are competitors of ABC in industry.
Company’s Future
ABC is Australia’s most important public institution that educate, provide radio, television and online services, and inform to billions of Australians each day. In the future the company aims to provide universality that enables the Australians to access the broadcasting services without any geographical boundary; it also aims to provide localism through which it allows people to communicate that has similar interests. It also ensures to provide diversity in news and information, enhancement in intellectual and creativity in Australian society, innovation and quality through content that enriches the society and encourages the creative endeavor.
Company’s Profit
In 2009-2010 ABC operated in the total sources of funds and revenue provided by the government. Federal Budget allocated $929.9 million budget in May 2009. Federal budget provided funds for Australia television drama, establishing regional broadband hubs all over Australia, and launching digital children’s television channel.
Figure shows the division of budget offered by the Federal Budget for various sources in 2009.
Figure shows the division of funds that is allocated for the specified programs which is related to four outcomes in the year 2009-2010.
Figure shows the financial analysis of ABC for the five year.
Importance of Industry Analysis
Industry analysis is very useful as it helps in understanding the context of the decisions taken by the firm within the building blocks of the strategy formulation of the company. Industry analysis is also useful as it supports in making the effective and efficient decisions regarding the entry, exit, expansion, positioning of product, and cost reduction of products and services offered by the firm. It is also helpful in identifying the potential attractive and unattractive areas of growth in which the form can expand its operations and achieve the profitable results. Industry analysis also helps in understanding the present rule of the game in the industry that eventually changes them. It also helps in understanding the structural conditions and competitive forces that operates around them.
Industry Factors for determining Average ROI
Global management portfolio is complex due to the extension of single country or the domestic fund management. The complexity occurs due to the cultural differences among the countries that raise problem regarding the market efficiency, security analysis, and preferences of investors. Market of Australia is dominated by resource companies that impact Australia market index returns. Average of ROI for the firms operating in the unattractive market is 13.4%, average ROI of the firm which are operating in attractive market are 31.3% and the difference between the affects of industry are between the 40-75% in the industry returns.
Profitability of Australian Industries
There are many industries in Australia, which contribute in the overall revenue of the country. Australia has the most open and competitive market in the world that includes millions of people. The country has 22 million people and has more brands in comparison to USA. The country has large market but due to strong dollar it has made the industries to compete. Many industries like automobile, tourism, gaming, etc has the high profitability share. The country has the luxury market that impacts the high end products across the economy of the country. Following table shows the list of industries operating in Australia and their profits according to the results collected in the year 2006.
| Industry | Profit 2006 |
| Mining | 19.8% |
| Finance-Insurance | 19.3% |
| Real Estate, Rental, Leasing | 16.1% |
| Arts, Entertainment, Recreation | 13.5% |
| Educational Services | 11.9% |
| Professional, Scientific, & Technical Services | 9.7% |
| Health | 9.5% |
| Manufacturing | 8.7% |
| Agriculture-Forestry-Fishing-Hunting | 8.7% |
| Utilities | 8.0% |
| Accommodation-Food services | 7.6% |
| Construction | 6.5% |
| Transport and Warehousing | 6.5% |
| Retail | 4.3% |
| Wholesale-Retail | 4.2% |
Determinants of Industry Profitability
Business is all about creating the value for the customers, who can be either through production or commerce. There are there determinants that contribute into the profitability of industry such as:
- Value of the product to customer– Value is created by the company when the price the customer is willing to pay exceeds the cost incurred by the company. ABC also sets the price which is in the range of the customer and they are willing to pay.
- Intensity to competition– When the competition is strong among the producers then more surplus is received by the customers. In Australia competition is high among the various industries that impact the profitability of the various companies.
- Relative bargaining power at different levels within the value chain– There are very few firms in Australia which can compete the Australian Broadcasting Corporation, therefore, the company enjoys the market share and has strong bargaining power.
Where does the company fit?
Due to the subscription of the TV the households penetration is around 30% content that is available online through the help of IPTV, and the other FTA channels for viewing the digital television, NBA rollout and the fast broadband and the digital radio availability, it is required that broadcasting industry will require change in the coming years in order to retain the audiences. The Australia broadcasting corporation enjoys the large market share and is second broadcasting company that captures the large market share.
The television management of ABC takes the effective decisions that has significantly cut the amount and number of ABC produced programs, but these decisions has affected the resources. Through these decisions the ABC is able to create, produce and own its television content in the specific cities such as, Perth, Hobart, and Brisbane. The company is looking forward with the fully integrated digital newsroom at all its ABC sites in Australia. The company will add new equipment and systems in the Green Valley that will strength the network as the leading resource of news in Australia.
Analysis of Industries
Industries are usually analyzed through the changing economic trends in the country, changes taking place in the demographic structure or it can be change in social and political trends, which are significant for strategy analysis. ABC focuses over providing value and innovative products to the customer in order to compete with its competitors in industry. For competing with the competitors the company conducts the environment analysis. Through continuous scanning of the entire range of the external influences the company can easily identify who is competing with it in the industry.
Industry Definition
Industry is defined as the group of firms that produce or manufacture the products which has close substitute with each other. One company can operate its business in many industries at the same time.
Industry Environmental Analysis
– National/International Economy- ABC has delivered less robust growth in the financial year 2009. The company has reported 27% increase in the 4th Quarter profit in the entire business except the television. The company has well positioned itself despite of the problems in international economy. Financial success achieved by the company is due to its steady growth in the year 2002.
– Technology- with the changes in the technology the company needs to change its business practices and capture the market by providing the technologically advanced services. The company needs to ensure the transmission of its services on all the subscription on television platforms. As the company services is currently retransmitted on the Austar and Optus platform and also on the FOXTEL cable services. The company services are not retransmitted on the FOXTEL satellite services which the company need to take part in.
– Natural Environment- With the advancement of the technology the company must also focus on the development on the environmentally services and try to balance the carbon remittance by the use of the electronics which is required to provide services to the customers related to radio television, online and mobile services and so on.
– Demographic Structure- ABC must also focus on the demographics of the economy and try to tap the balanced market structure. The demographics related to the company include the balance in between the suppliers, competitors and the customers.
– Political Factors- There is a high risk faced by the organization with respect to the political environment. With the changes in the political environment the company must keep a watch on the news to be publicized and also what it should and should not publicized.
– Social Factors- social factors also has an impact on the news channels and broadcasting channels,. With the issues related to the social economic environment of the country the company need to be cautious related to the broadcasting of the issues. The company also keeps a watch on the factors like the use of social media by its staff and employees that does not bring any discrepancies and disputes.
Industry Structure- Using the spectrum of the industry structures it can be said that the organization is working in the competitive market environment. Through there are few players in the industry still the company faces hard competition from others. Looking at the industry it can be said that the company is in the oligopolistic market structure where there are few players ruling the industry. As per the industry analysis theory it can be said that the company drives competitive behavior and also this affects the industry profitability. The profitability of the industry is impacted by the changes in the industry structure and this is also vital for the development of the organizations working under it.
Five Competitive Forces
The five competitive forces that are taken into consideration for the purpose of evaluating the forces that influence the profitability of the organization and its competition level in the industry. There are several factors in the industry that determines the intensity of competition and the level of profitability that the organizations will make in the industry. As per the model described by Michael Porter there are five forces that impact the organizations working in the industry. The collective strength of all these forces determines the potential of profit for the organizations operating in the industry.
Porter’s Five Forces Model
Bargaining Powers of buyers-
Force strength – High
This shows that how much power the customers can impose on the organizations and affect the margin and volumes. The buyers in the broadcasting industry are the users and the advertisers do not have vital switching costs and are also very price sensitive. The taste of the viewers changes with high frequency and shows little loyalty to any broadcaster. The buyers like the advertisers also dictate the television programs and theirs choices. The industry faces high threat when the buying industry has a higher range of profitability than the supplying industry.
Bargaining power of suppliers-
Force strength- Low-Medium
The suppliers include all those sources or inputs that are required for providing the goods or services to the ultimate customers or viewers. The suppliers to the broadcasters are either have been acquired or are having a tie up with broadcaster, so they have a lower bargaining power. The supplying industry in the broadcasting industry are several small operators, as the services provided are undifferentiated and can also be replaced by the substitutes. This shows that the suppliers have a lower and medium power to affect the broadcasters.
Threat of entry-
Force of strength: Low
There is a very low threat of new entrants due to high start up costs required for entering into this industry. The new entrants also faces higher challenges related to the distribution channel and also find it difficult to find skilled employees, suppliers and materials. The entry is also difficult as reaching the economies of scale require long period which de-motivates the new entrants. There is also a brand loyalty of customer’s n this field.
Structure of five force model
Threat of substitutes-
Force strength- Medium
The threat of substitute exists in the industry where different alternative products and services are available with lower prices and also similar performance parameter. In the broadcasting industry there is a medium scope for the threat of substitutes as there are few players in the market and have somewhat similar prices for the services offered. This industry also has other substitutes like other free activities, games, concerts, sports, restaurants and so on. The industry also faces one broadcasting medium as substitutes for the other like movies as replacement for television.
Competitive Rivalry
Force strength- High
This factor determines the level of competition prevailing in the industry in between the existing players in the industry. High competition in the industry pressures on the margins, prices and also on the profitability of the organizations. This is because in the broadcasting industry there are players with whom the organizations face high competition. The layers in the industry have similar strategies. There is least difference in between the services and products offered so there is a high price competition.
Strategies for coping with 5 Forces
There are several strategies that the organizations can adopt as the organizations can establish themselves in a manner to outperform and this can be done by the cost differentiation. The organization can also identify factor that are less sensitive to the five forces and can gain the advantage of getting or targeting other customers or viewers. The organization can also try to modify the five forces i.e. can reduce the inter rivalry among the firms by creating switching costs for the customers which will benefit the organizations in the industry the example of switching cost may be charging a fees or voiding the warranty and so on.
5 Force Analyses
From the analysis of the five forces it can be said that the dominant forces in the industry are the threat of substitutes and the buying power of buyers. The five forces may change with the changes in the strategies of the organizations operating in the industry. There is a great impact of the key competitors in the industry as the broadcasting industry faces large amount of competition and the market structure are among the forces which are driving these forces. For influencing the impact of five forces the organizations in the industry try to modify it and make it least impacted with these forces.
Firm’s interpretation towards five-force analysis
The firms can interpret the factors that can affect the business and then can determine the attractiveness of the industry in terms of the potentials to earn a satisfactory some or amount on the capital invested. Looking at the broadcasting industry the organizations must keep a watch on the factors related to the five forces and maintain a level of balance in order to attain a average return on its investment. This can also be interpreted from the analysis of the five force model that the stronger the forces the higher the profits of the firm or organizations in the industry.
Five Competitive Forces- Example
The examples of the competitive forces for the Australian Broadcasting Corporation are: the bargaining power of buyers: buyers can bargain as they have several other options to avail and also have options of substitutes. Looking at the example of bargaining power of suppliers as the suppliers in this industry are the operators or agencies which provides services or information related that needs to be broadcasted to the customers. The example for competitive forces includes the other media channels or broadcasters, movies, restaurants concerts and so. Threat of substitute example includes the switching of customers from one channel to another for watching or listening other shows or programs featured by other channels or broadcasters.
Ways for competing in industry
The way in which Australian Broadcasting Corporation can compete in the industry includes the increase in the concentration ratio of the firm. The organization tries to increase its market share among the overall market or industry. The organization can also compete in the industry by the way of differentiating its products and services, as the more the products and services within the firm are similar the more the customers switch towards the substitutes. The firm must also excess the capacity to the largest extent and bring in the economies of scale for facing the competition in the industry.
Questions for Industry Analysis (300)
There are several questions for the industry analysis which needs to be answered. The answers t the questions have been explained in the brief:
The industry dominant traits
Components of Industry Analysis (400)
– Competitive Structure- there are several industries
– Permanence
– Phase of Life Cycle
– Vulnerability to External Shocks
– Regulatory and Tax conditions
– Labor conditions
– Historical Financial Performance
– Financial and Financing Issues
Company’s Response to the forces (100)
What should be done about the forces? (100)
Relevance of forces to the case (100)
Realism (100)
Conclusion (100)
Links
http://www.blackwellpublishing.com/grant/pdfs/CSA5eC03.pdf
http://en.wikipedia.org/wiki/Australian_Broadcasting_Corporation#Funding
http://www.abc.net.au/corp/annual_reports/ar08/pdf/sec5a_financials_l7_final.pdf
http://www.abc.net.au/corp/annual_reports/ar08/pdf/ABC_Annual_Report_2008.pdf
http://www.abc.net.au/corp/annual_reports/ar08/pdf/sec2_abc_overview_l5_final.pdf
http://www.abc.net.au/corp/annual_reports/ar08/pdf/sec4_summary_reports_l5a_final.pdf
http://www.abc.net.au/corp/pubs/documents/heritage_strategy_0607.pdf
http://www.abc.net.au/corp/pubs/media/s1842867.htm
http://www.archive.dbcde.gov.au/__data/assets/pdf_file/0019/10972/ABC.pdf
http://www.dbcde.gov.au/__data/assets/pdf_file/0005/87674/0043002001_ABC-SBS_WEB.pdf
http://www.ret.gov.au/tourism/Documents/nltts/State_of_the_Industry_2011.pdf
http://catalogue.nla.gov.au/Record/722347
http://www.budde.com.au/Research/Australia-Broadcasting-and-Pay-TV.html
http://www.abc.net.au/news/2008-08-06/economic-conditions-to-affect-future-earnings-news/466316
http://www.acma.gov.au/webwr/_assets/main/lib311250/aust_b-casting_industry_codes_and_standards.pdf
http://www.aimia.com.au/home/events/past-industry-events/9th-annual-broadcasting-summit-2011
http://www.archive.dcita.gov.au/2004/01/file_listing_1_july_2003_-_31_december_2003/broadcasting
http://www.budde.com.au/Research/Australia-Free-to-Air-TV-Industry-and-Market-Analysis.html
http://www.budde.com.au/Research/Australia-Broadcasting-and-Pay-TV-Overview-and-Analysis-2010.html
http://www.reportlinker.com/ci02095/Broadcasting.html/coverage/Oceania:Australia
http://www.reportlinker.com/ci02097/Television-Broadcasting.html/coverage/Oceania:Australia
http://www.scribd.com/doc/86232233/12/Porters-five-force-model
http://www.abc.net.au/corp/annual_reports/ar08/pdf/sec4_summary_reports_l5a_final.pdf
http://www.abc.net.au/corp/pubs/documents/heritage_strategy_0607.pdf
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