Focused Case Analysis #1:  The New York Times Co.

This case centers on the challenges facing The New York Times Company as of late 2008.  These challenges are not insignificant.  For example, large segments of the news and media are ported to the Web, causing print subscriptions to decline rapidly.  The firm’s revenues and profit margins are lower than all its competitors.  Moreover, its competitors are more diversified than the NYT Company [which offers them partial insulation from changing print demand.  And, while the Company is valued for its unbiased news reporting and outstanding publishing [according to many], its growth has been hampered significantly by the appearance of such online news outlets as Google News, among others.  Your task is to evaluate The New York Times Company’s current and recent position, assess the strategic options and craft recommendations as to how the firm can address its strategic issues and move forward in a stronger, more profitable fashion.  To do so, your assessment is to focus directly on the following questions [drawing both on the text as well as your outside research].

Note:  In addition to studying the New York Times case, conduct sufficient outside research on the company to bring the case information up to date [i.e., from November, 2008 forward].  This will be your first step, as noted in part 1 below:

1 – Briefly outline The New York Times Company’s current status, based on your outside research [the business press, 10Ks, Annual Reports, the corporate Web site etc.]  A minimum of 5 sources are expected.]   Update the case information with relevant data pertaining to the company’s financial and strategic performance.

2 – Perform an analysis of the company’s external environment in order to understand both the opportunities and the threats facing the firm.  [Include, in particular, the firm’s social/demographic, technological, economic, and Geographic/Environmental segments.]  After identifying key factors in the general environment, present your analysis as to how the Company is likely to be affected by those factors.  As part of your analysis be sure to take account any changes in the external environment since late 2008, based on your research.

3 – Using the “five forces model” or approach [threat of new entrants, supplier power, etc.], perform an analysis of the news industry in the U.S.  Given this analysis, is the industry attractive or unattractive?  Also, identify the Company’s “immediate” competition as well as its “impending” competition [the smaller content providers who are attempting to carve out a piece of the market and can expand rapidly due to low cost/high impact web-based outlets].  Note:  The Company also faces “invisible” competition from Google and Yahoo! for example, who offer simple online advertising programs and are also offering news content to viewers.

4 – Create a SWOT analysis to understand NYT Co.’s strengths and weaknesses.  Based on your analysis, does the NYT Co. have a sustainable competitive advantage in the publishing industry and, if so, what is the source?  And also, looking at both the company’s evolution as well as its current business strategy, what problems may it face going forward?

5 – Including your case-update data, present a brief financial analysis on the firm, covering the most recent 5 years. Present selected key ratios that you believe are relevant to assessing the company’s financial direction and strengths/weaknesses, wherever significant trends are in evidence.

6 – Prepare a set of recommendations addressing the following:

1. What long term strategy should the NYT Co. implement – based on all the information you’ve gathered and the analyses you’ve presented to this point?  And, how can it differentiate itself from its various competitors?
2. How can the NYT Co. leverage the competencies of the new media outlets that it has acquired to improve its financial situation?

Format, Length and Presentation

• Use the current APA-Style guide in preparing your report.
• Attach the standard University cover sheet to the report. [See separate link.]
• Length of narrative: 8 to 12 pages [double-spaced], exclusive of cover sheet and References page.
• Table of contents not required; include Appendix [for tabular data] and a Reference sheet at the end that shows the sources cited within your narrative.
• Use headings to clearly indicate the subject matter and/or issue on which any given section of your narrative focuses.
• Correct use of grammar and spelling is expected, and will affect one’s grade on this case report.

SOLUTION

Assignment Topic: Strategic management

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Current Status Report of the New York Times Company

The New York Times Company was incorporated in 1896 under the New York state laws. The core purpose of the company is to enhance the society through collecting, creating, and distributing the information, entertainment, and high quality news. The company leads in the multimedia news and information that includes the digital business, newspapers, paper mills and other investments (Wright, 2001). The company has two segments such as, News Media Group and About Group.

The News Media Group of the company includes different segments such as, the New York Times Media Group and The New England Media Group. The About Group consists of the CalorieCount.com, ConsumerSearch.com and other related businesses. In 2008, the total revenue of the company declined 8% (The New York Times Company. 2011 Annual Report, 2011). Revenues earned through advertising that is the primary source of the company declined by 13%. Even in the operating revenue the company faced the loss of $41 million in comparison with the operating profit of $227 million in the year 2007. By excluding the amortization and depreciation the operating profits of the company were $302 in 2008 with comparison to $457 in 2007 (Financials, 2011).

In the 2011, fourth quarter results the earning per share through the operations of the company was accounted to $.39 in comparison to $.44 in the year 2010. The company has earned an operating profit of $106.7 million in 2011 in comparison to fourth quarter of 2011 which was $111.6 million that shows the company’s financial performance is declining from the last year. The revenue stream of the company in advertising, subscribers, and Newsstand is dropping in comparison to last year.

Financial performance of the company is declining that reflects the company’s exposure towards the unfavorable secure tends that impacts the newspaper print circulation and advertising (Preston & O’Bannon, 1997). The business risk profile of the company is weak, as these risks minimize the important national presence of the company along with the brand equity of New York Times Newspaper. The financial risk of the company is aggressive due to the debt leverage of the company along with the huge underfunded obligation for pension. Spending over the advertising is the important portion of the total revenue that is sensitive to the prevailing economic condition. The economic factors that have impacted the advertising revenue: business spending lower consumer, decreased home sales, high unemployment, and other challenges of the economy (Cornell & Shapiro, 1987). The strategic performance of the company is better as it preserves the brand and reputation. Each year company spends revenue over the television, periodicals, and radio for enhancing the strategic performance.

The External Environment

• Social Factors– Media companies often have to face the social challenges as they are part of society and for work for the enhancement of the society. The major challenge faced by the New York Times Company is due to the society as it is not possible for the company to present the news those carets social issues in society. While presenting the news, it has to be molted so that sentiments of the civilians are not hurt. Many times people or communities don’t accept some news and revolve against it.
• Technological Factors– in America, 3-4 people are using the Internet at home in the year 2004; the expected figure has increased after the 2008. Broadband has boosted the people convergence, as they can easily access the websites and download files. According to the Federal Communications Commission report, the Jupiter Research has shown that in 2009, there will be 108 million internet users, which is double from 2004 which was 55 million. The New York Times Company is impacted by the technological change as people are more interested in reading the newspaper online rather than through papers; therefore, they have to shift their business online (Quinn & Filak, 2005).
• Economic Factors– The financial revenue of the company is generated through the Google. If About Group is unable to continue with the prevailing agreement with Google in favorable terms or if the position of Google in market wanes then the company financial condition and operations results can be affected.
•  Environmental Factors– People are becoming more environmental conscious and are reducing the usage of appear, that’s also a reason for decrease inthe New York Times business, and they have to shift their business towards e-papers (Sigismondi, 2011).

The business of the company depends on its external environment; therefore any changes in the external environment impact the growth of the company, which can be positive or negative. The external factors discussed can impact the business of the company and it is important for the company to take certain actions to meet out these challenges.

Industry Analysis and Competition

U.S News Industry Five Force’s Model and its impact on New York Times Company

1. Bargaining power of Buyers

• Buyer’s needs special customization- Customers usually needs special customization as they are less likely to move over producers that have problem in fulfilling their demands. This customization of buyers affects the New York Times and other news company.
• Product is significant for customer- When customer cherish with specific product they don’t pay for more for the other products. This impacts the New York Times.
• Huge number of customers- In the case, when there is a large number of customers, no one customer has the leverage for bargaining, and limited bargaining supports the New York Times (Fellow, 2009).

2. Bargaining power of Suppliers

• Critical inputs for production are same- When inputs are similar, it becomes east to match and mix the inputs that reduce the bargaining power, and this are the positive point for the New York Times.
• Volume is important for the suppliers- When suppliers start reliant over the high volumes, their bargaining power is less, because producer can threaten the reduction in volume and impacts the profits of the suppliers, and this can also affect the New York Times and other news companies in America.

3. Intensity of Existing Rivalry

• Increased size of industry-As huge news industry allows many firms and producers to flourish without stealing the market share. In that case, large industry size is beneficial for New York Times, as it can easily grab the large share of the market.
• Few Competitors- There are very less forms in America, which are into news industry that is the positive point for the New York Times Company (Verschoor, 1998).

4. Threat of Suppliers

• Low quality substitute- Till the New York Times enjoys the maximum market share, and usually consumer shift to other product when they find the low quality in product.
• Product differentiation substitute- When services and products are different, customers doesn’t find comparable services or products for meeting their requirements.
• Limited Substitutes- In America, there are fewer substitutes of products and services offered by news industry; therefore, it is beneficial for the New York Times.

5. Threat of New Competitors

• Capital requirements- New York Times spends high capital for competing in the market.
  Strong requirement for distribution network- If the distribution network is weak then goods are expensive and losses customers. Therefore, it is important that New York Times builds the strong distribution network.
• Advanced technology required- Advanced technologies is added advantage for the New York Times as they focus on building an advanced technology for providing better services and products to customers.

SWOT Analysis

Looking at the SWOT of the company an analysis can be done with respect to the major strengths, weakness, opportunities and threat about the company.

• Strengths: The major strength of the New York Times is its brand name, which is highly popular among the people for its unbiased news reporting and outstanding publishing. The company also has a competitive advantage in the publishing industry due to its supply chain management and its brand name. The company also has gained several times the best journalist talent and also has the strength of its employee’s loyalty and the customer loyalty. The company also has the strength of expanding into the technology and launched the online news platform.
• Weakness: the major weakness of the company is its cost structure and the lower revenue generation from the digital New York Times. The company also has the weakness of the work inefficiencies and a large amount of debt burden on the company. The company also has the weakness as the newspaper business which is lagging back due to the increase in the use of technology by people and the development of the resources which is making the newspaper an old method of reading. In the digital age, the company faces competition from several competitors like the Google news.
• Opportunities: There are several opportunities in front of the NYT Company. The company has the opportunity to launch itself by collaborating with IPAD. The company also has the opportunity of expanding into the online market place and start new services, which will increase its revenues. The company also has the opportunity of international expansion and can also collaborate with Kindle like devices.
• Threats: The Company faces threat with the online news technology in long term and also faces the political risks. The company also faces the threat of volatility of the revenues. The threat also includes the risks from the substitute products. With the increase in the paper and the cost of delivering the paper, the company also faces threat of the increase in the costs which will affect the business of the company in the long term.

Financial Analysis

From the financial analysis of the company for the past five year’s data, it can be said that the company has improved in liquidity terms. As the company current ratio has been improving from last five years, the company has a current ratio of .68 in the year 2007 while this has been improved to 1.46 in the year 2011. The company acid test ratio has also been improved in the year from the year 2007 i.e. .65 to 1.42 in the year 2011.

The company capital gearing has also increased from the year 2007 i.e. 61 % to 79 % in the year 2011. Though the company has decreased in providing the return to the shareholders as the company EPS ratio has decreased from the year 2007 i.e. .60 to -.27 in the year 2011. This shows the decrease in the returns of the shareholders. The company has also decreased its debtor’s collection period which is a good sign for the company credit given to the debtors. Looking at the company gross profit margin the company has decreased its revenues the company has the GPM in the year 2007 as 5.86 % while it increased to 9.78 % in the year 2010 and has decreased to 2.44 % in the year 2011 (2011 Annual Report & Form 10-K, 2012).

The company revenues have decreased a lot in the year 2011. The company return on capital employed has also decreased in the year 2011 as compared to the year 2010. From the overall analysis of the company financials, it can be said that the company has decreased its revenues a lot in the year 2011 as compared to the previous years. The company asset turnover has improved in 2011 from the previous year 2010 but has decreased from the year 2007 and 2008. The company operating cash flow turnover has been shown a steep rise in the year 2011 as compared to the year 2010. The return on equity has also shown a steep downturn in the year 2011 i.e. -7.89 5 as compared to the year 2010 I, I, 16.37 %, This show that the company has a high amount of decrease in profits in the year 2011 (2011 Annual Report & Form 10-K, 2012).
Recommendations

From the above analysis of the company, it can be recommended that the company should implement the strategy to launch its online news portal and try to attract its existing loyal customers which will help the company to maintain its position in the market even with the decrease in the share in the newspaper market. The company differentiates itself from its competitors by way of its unbiased news reporting and outstanding publishing and having a large loyal customer base. The company can leverage its position in the market by collaborating with several online media partners and also by entering into the technological field and providing online news services. The NYT co. leverages its competencies by way of collaborating with several technological companies and tries to improve its financial position, as the company can collaborate with devices like Kindle, Ipad and so on.
References

2011 Annual Report & Form 10-K. (2012). Retrieved June 1, 2012, from http://www.nytco.com/investors/financials/annual_reports.html

Quinn, S. & Filak, V. F. (2005). Convergent Journalism: An Introduction. UK: Elsevier.

The New York Times Company. 2011 Annual Report. (2011). Retrieved on 1 June 2012, from,

http://www.nytco.com/pdf/annual_2011/2011NYTannual.pdf

Financials. (2011). Retrieved June 1, 2012, from

http://www.nytco.com/investors/financials/risk_factors.html

Sigismondi, P. (2011). The Digital Globalization of Entertainment: New Paradigms in the 21st

            Century Global Mediascape. USA: Springer.

Fellow, A. R. (2009). American Media History. USA: Cengage Learning.

Preston, L. E. & O’Bannon, D. P. (1997). The corporate Social- Financial Performance

Relationship. Business and Society. 36(4), pp. 419- 429.

Cornell, B. & Shapiro, A. C. (1987). Corporate Stakeholders and corporate Finance. Financial

            Management. 16(5), pp. 1-14.

Verschoor, C. C. (1998). A study of the link between a corporation’s financial performance and

Its Commitment to ethics. Journal of business Ethics. 17(13), pp. 1509- 1516.

Wright, J. (2001). The New York Times Almanac 2002. USA: Routledge.

Appendices

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