Introduction
Yahoo is an internet services provider in the global community; it has grown for a period of time now as a portal company. The company has had its share of challenges and success just like any other company in the market. The company has a huge market share and user base and operates in more than twenty-five countries across the globe. (Yahoo! Media Relations 2007)
A firm is said to possess a competitive advantage when it sustains profits that exceed the average for its company. The goal and objective of many firms are to achieve a sustainable advantage in the market and over rivals. Generally, to carry out a competitive analysis of Yahoo, certain important things should be done, the first thing is the analysis of both internal as well as external marketing environments for Yahoo. (Curtis et al 49).
The Yahoo competitive advantages can be well analyzed and identified through the use of these tools because they cover both the external as well as the internal environment and these are the main determinants of competitive advantages for a business organization (Curtis et al 49).
How to identify competitive advantages
Porter’s five forces
Porter identified the two types of advantages that firms strive to achieve i.e. cost advantage and differentiation advantage. Yahoo just like any other firm strives to get these two advantages; because of this, the firm has employed many different strategies to gain these advantages. (Kim et al 2005).
Barriers to entry
Brand power
There are certain barriers to entry that exist for the Yahoo firm in the industry. The barriers that are available include a very high brand power for the firm. Though many other firms can enter the brand name is what sells in the industry so building the brand name for a new entrant is a challenge on its own. (Kim et al 2005)
Technology that is complicated and changing fast
The complicated and changing technology presents a challenge to the new entrants; this is because it would be a challenge to keep up with the changing technology when entering the market and this can result in the collapse of the firm. Yahoo firm is in a better position since it is already established in the market and it has already adopted complicated and changing technology trends. (Kim et al 2005)
Initial financial resources
The initial financial resources of setting up a firm is very high, this is because of the cost of setting up the data system as well as marketing the firm in the market. This act as a barrier to entry for many of the firms that wish to enter the market, this is because it has to invest high financial resources that may not give output fast. (Kim et al 2005)
Buyer power
The buyer power is very high for customers in the market, this is because they have a variety to choose from and because of this they usually go for the site that seems to have favorable services. Because of this Yahoo should develop a strategy such that in the midst of the high buyer power and competition they can attract the highest number of customers. (Kim et al 2005)
Buyer power is based on the quality of information that is provided by the firm, this is because the customers will be attracted to the firm that provides the latest as well as reliable information. Yahoo is one of the firms that provide reliable and accurate information and that’s the reason why the firm has managed to gain a competitive advantage in the highly competitive business environment. Also, brand recognition plays important role in buyer power; the more the brand is recognized the more the buyers will be attracted to it. Yahoo has established a strong brand name in the market and for that reason, it enjoys very high buyer power for its services and products. (Kim et al 2005).
Supplier power
The supplier power of the firm is very high and it is based on certain factors that are major to the company success. Some of the factors that contribute much to the high supplier power for Yahoo are the unique information content. This unique information content differentiates the company from many other firms in the market. The other contributing factor is the huge user base that builds the firms brand recognition, this gives the company high supplier power and in turn provides competitive advantage for the firm in the competitive business environment. (Kim et al 2005).
The other factor is the intense rivalry for top talent labor in the firm, the firm strives to get the best top talent labor in the market and through this it has managed to have a higher supplier power. This is because talented labor provides skills and services that place the firm in a better position in the business environment and also give a competitive advantage. (Kim et al 2005).
Potential substitutes
Already the market has other players who offer similar services that can serve as substitutes, for instance, Google is a strong competitor and its services are substitutes to the services of Yahoo. This shows that there is a great threat of substitutes in the market for Yahoo services. This is one way or another affects the market position of Yahoo and to succeed in such a situation there is a great need for the implementation of strong strategies that will enable the company to achieve a competitive advantage over the rivals’ substitute products. There is also the threat of vertical sites and new technologies through which the customers can access the same services and products provided by the firm. (Nicholas 2007).
The degree of rivalry in the industry
Since there are many other sites available like Google and MSN the degree of rivalry is very high. Also there are other potential companies that can enter the market because of low barriers to entry. The company is facing competition rivalry from the Google Company and other upcoming sites. This presents a challenge to the company and reduces the competitive power of the company in the market. Also the industry rivalry is moving very fast such that what one company was using to compete with in a very short duration is not viable. (James 2005).
From this analysis, it is clear that there are great competitive challenges that are faced by the Yahoo company in marketing the products but in the midst of these challenges the company has managed to keep its head high and so far it stands in a better position in the market. Certain factors create a competitive advantage for the company. (James 2005).
Analysis of firm’s resources and capabilities
Their community and user base is a strategic advantage
The company has a very large and strong community and user base across the globe. The large community base has been achieved through the variety of adverts that are displayed. Many people go to the internet to search for certain information and since Yahoo has variety many are attracted to the site. Also, they offer favorable prices such that most of the users are attracted to the site.
Yahoo holds its community close to the heart this is because it acts as a strategic advantage in the business environment, in that when they use the site they are in a position of raising high amounts of revenue that maintain the company. Also having large user base it helps in building brand recognition and name in the market since the user base refers their friends to the site. The company has the largest community share in the market 51 percent that signifies half of the market leaving the rest to competitors. The reason for this is that it covers 21 countries and has over 500 million users globally. (David E01)
The user base has increased over the years; this is because of the advancement in society needs such that there are many companies that put their products adverts in the internet. Because of this the number of users continues to increase as they search products and services. As the user base continues to increase the revenues and profits made by the company also increase as evidenced in 2003/04 analysis. User base increased by 10 percent from 2003-2004, this translated the revenues to $1.08 billion from $663.9 million. This was a significant change in revenues of 62 percent due to increased user base. (David E01)
The large user base and community gives the company a better chance over its rivals, this is because the more number of users you have the better the position in the market since it means that the services provided are of high quality (Whitney 2007).
Adoption of the ever changing technology
The Yahoo Company ensures that it keeps in touch with all the changes in technology that may affect the operations either positively or negatively, for instance byte technology. The company to utilize the technology for its success it worked together with Microsoft and increased the server speed. It is because of this that it has ensured that the services it provides are up to date and through this the company has managed to sustain its large community. For instance currently the company adopted a new beta release of the new mail program such that it is possible for the users to view their email messages even without opening it; this reduces the time users take to access their mails. Some of these actions signify the adoption of technologies and high rate of innovation in the company that gives it a competitive advantage over its rivals in the market (Shahid & Tang 6457).
Variety of services
to meet the increasing demand of the users and to maintain its large user base the company keeps on innovating new ways to place the company in a better position in the market and to effectively meet the needs of its users. For instance, it has recently modified its site such that it provides very many adverts to the users such that it does not need many efforts to get to know what’s new in the market and where to find it. This is done through changing the contents of the site especially the first page such that there are adverts relating to different needs in the society, they are changed often to attract more attention from users. This has been possible through the development of a new beta version of its site that provides variety to the customers.
Apart from the variety of adverts on products and services provided by the company, other services are provided and are unique to the company. For instance, it provides three major sources to the users, the first one is “My Web” which comprises the pages or sites the user has opened and found essential for him or her and saves them for future reference. Such kinds of saved pages are usually saved by Yahoo on its servers and the best thing is that they do not harm the machine. This makes it easier for the user to get the preferred information very fast from my web (Whitney 2007).
The other source is every one web; this is the general internet every one opens to find certain information. This provides all the general information wanted and one has to identify what he or she wants to get. The final source is “my community’s web” this kind of source provides certain information that has been marked as of importance by members of a particular social network. These are the privileges provided by Yahoo to its customers that competitors like Google do not provide. Through this it becomes easier for the users to network and share important information. (Shahid & Tang 6457).
The provision of a wide variety of resources has placed the company in a better position over its rivals and has given it a competitive advantage. This is because customers usually like variety to choose from since one chooses what best suits him or her. Hence through such innovative actions, the company continues to build the intelligence of its community (Shahid & Tang 6457).
Large user base
The company benefits and enjoys a large user base across the globe; it has more than 200 million active users who are located in more than twenty countries across the globe. This is an important competitive advantage tool for the company, this is because if the user base is sustained and more potential users are attracted it will mean that it has the largest market share (Nicholas 2007).
The major focus of Yahoo is to systematically build community intelligence in all aspects of operations and to attract users to spend more time on Yahoo sites to view the many Yahoo adverts. This differentiates the company form the competitors and creates a better position for the company to sustain its market share and even attract more potential ones (Nullbit 2005).
The large user base gives the company a better opportunity to create community intelligence through segmenting the market into different units hence providing services that best suit that segment. This provides an advantage to the company since there are always users of the new innovations made hence a competitive advantage in the entire market over the rivals (Nullbit 2005).
However, though the company has strong factors that signify its resources and capabilities there are few challenges the company has faced. The company has invested more than 50 percent of its revenues in expanding user acquisition by having a web presence that forced users to stay on their site, this is one way or another has led the company astray. On the other hand Google the major competitor has mastered the art of monetization through contextual advertising that gives it 99 percent of its profits. There is more in gaining competitive power over the rivals than trying to expand the user acquisition though it has yielded benefits there are other many things that the company should have invested in (Nicholas 2007).
The firm is faced with high competition because of the high number of firms that have entered the industry. Some of the competing firms include Google which provides stiff competition and MSN. The high competition helps to come up with new competitive strategies to maintain competitive advantages. The other threat for the firm includes limited resources, this hinders the firm from achieving some of its objectives and goals. Also adaptability to the dynamic changes in the market is a threat this is because the business environment keeps on changing such that after implementing one strategy it is no longer viable in the industry (Holahan 2006b).
Yahoo and Google are both companies in the same market offering similar services to their users, the two companies are the largest competitive rivals in the market and each one is trying to capture attention of users in the market. Yahoo was there before Google and it grew very fast in the market back in 1999 and 2000. For now, the company is mature and has established itself with a very large user base across the globe (Holahan 2006b).
Recent changes and Actions of the firm
Recently there was the Microsoft and Yahoo bid, this seems to be a competitive game in the market. Microsoft wants to acquire Yahoo, “this proposal would allow Yahoo shareholders to elect, to receive cash or a fixed number of shares of Microsoft common stock, with total consideration being paid to Yahoo.” The offer seems good for Yahoo but it does not want to take it (Steven 2008).
Since online marketing has continued to grow fast it is predicted that the number will grow from $0 billion in 2007 to around $80billion by 2010. This will result in benefits of scale together with capital costs for advertising. The intention of Microsoft is for the two companies to work together since Microsoft believes that they will provide competitive opportunities to meet the needs of the customers and their partners (Steven 2008).
There are several synergies that are expected to come up after merging that includes, Scale of economies the combination will ensure that the economies that are associated with advertising platform. The economies are expected from search and non search related advertising. Expanded R&D capacity that will combine the engineering resources that both companies have, Microsoft believes that they can together increase the levels of innovation that will help in delivering high user experiences and new advertising platform capabilities for both companies (Steven 2008).
The company in regards to this offer has not yet made a clear decision; this is because it believes in taking time to analyze the offer and access whether it will be of importance to the company. As Yahoo and Google wrestle to sell changes there are differences in adaptation of the different changes that take place. Google updated its Google customized home page service while Yahoo instead added a new centralized profile page that mimics some facebook features and revamped the flicker page (Stephen 2007).
to keep up with the changes that take place the company adapts strategies that help the company to transform the changes into benefits. Yahoo took a contrite tone to deal with the changes; it has made changes in its profile. The changes have had some negative impacts that include loss of data for users but it can also be retrieved. (Chris 2006).
Sustainability of the firm’s competitive advantages
Shift from Yahoo to Google dominance
From the analysis of the market and the different companies in the industry, it is clear that there is has been a shift from Yahoo to Google and Google seems to dominate the market currently. Google has 47.3 percent market share while Yahoo has a 28.5 percent these are the major players in the market, while Microsoft has 10.5 percent and ASK 5.4 percent. From this data Google has a higher dominance which is almost two times that of Yahoo (Tom 2007).
The secret or the contributing factor to Google dominance is innovation; Google has become expert in planning its innovation strategies. For instance it monitored the increased marketing needs and developed innovative online marketing of products that it offers to its users. The major focus of the company is on advertising products for their customers and through this, the company’s share and dominance increase since many people find it easier to search for information on products through the site. It believes in the production of a lot of products quickly then collectively change the world through mass production. For Yahoo to be in a better position in the market there is a great need of adopting innovative ways and strategies that can help it regain back its dominance (Tom 2007).
Yahoo lost its market share to Google around eight years back, this started when the company decided to lent financial support and other help to Google through its site. Google used Yahoo to establish itself in the market and because of this, it gained popularity. Yahoo never knew that its support for Google would place it in challenging positions since it would rise to be a strong competitor in the market as it is currently. Not only Google is a competitor for Yahoo but also it has gained a higher market share and dominated the market (Tom 2007).
Google through its innovative advertising strategies to its clients it has managed to take away Yahoo’s market in United States. Currently Google is dominating the market share in United States since it holds 80 percent of the market share while the other percent is shared by the other sites including Yahoo that initially dominated the market. It is a challenge for Yahoo to regain the market share since Google has already dominated the market unless high innovative strategies are invented but it will still be a challenge.
The other reason why Google has dominated the market is because of its focus on online advertising for its clients. Through the adverts, Google attracted many users who were interested in adverts which over time has increased the dominance of Google in the market. On the other hand, Yahoo mainly focused on user acquisition which was the opposite of Google and lost many of its users to Yahoo since they found Google to have new adverts that met their needs (Tom 2007).
Carrying out a comparison between the companies and what they offer may not be easy, this is because there are things that Google offers that may be better as well as Yahoo. But from the analysis, Yahoo is said to be better based on certain services that it provides that either Google does not offer or which are better. Seven things have been highlighted that make Yahoo better than Google. The Yahoo finance, Yahoo answers i.e. questions and answers, back link Reporting via Yahoo site explorer, Flickr: Photo uploading and sharing, local search, Entertainment and privacy (Loren 2007).
Gaining a competitive advantage in the market is not very important as the ways and strategies of maintaining that competitive advantage. The company uses the following factors to sustain its competitive advantage.
Adoption to changing Technology
The company has been technology conscious such that it monitors all the changes in technology and uses it to develop new services that satisfy the customers needs more efficiently. For instance it adapted the added a new centralized profile page that mimics some face book features and revamped the flicker page. Also as the technology keeps on changing other technological needs come up for the users, the the company comes up with new technologies that satisfy the emerging needs of the users. For instance, it has adopted a new way of retrieving your messages such that it is easier to get the messages without opening the mail inbox; this reduces the time taken to get the information. Through this, the company has been in a position of maintaining and sustaining its large community and user base that are sources of competitive advantages for the firm in the market (Holahan 2006a).
Also through the use of the ever-changing technology the company develops a new and variety of services that users can use and that improves the community intelligence of its users.
Monitors what’s taking place in the competitive environment
The company keeps an eye on what’s taking place in the competitive business environment. Through this, it monitors what the other companies are doing to gain a competitive advantage and utilizes that to develop better strategies to out do the competitors. This is what happened with the Google, it uses the textual advertising which “is a small piece of programming code which is inserted into web pages which interprets the text and serves advertising based on keywords.” (Franz Developer Symposium 2003).
This is a strategy that has been used by Google and produces 99 percent of the company’s profits. Yahoo has adopted this strategy of contextual advertising that has proved to be profitable, through this it will be in a position of sustaining its competitive advantage over the rivals. This is because it has known what it uses to capture its competitive advantage hence it will be possible to beat the company (Erin 2008).
Carrying out consumer surveys
Since the company is focused on providing an intelligent community and presenting the best to its customers it carries out consumer surveys on important issues. This gives the company a chance of getting to know better the needs of the market and uses this information to come up with products that best suit the needs of their customers. They use customers to inspire them on what to do to maintain their competitive advantage in the competitive business environment (Erin 2008).
A good example is a survey done by the company on “whether the consumers considered purchasing an alternative fuel vehicle in the next year.” The survey reflected that sixty percent was for the idea; this created a better opportunity to serve a consumer need that had been identified. Also through the surveys, the company has managed to know what exactly wants in the market and they have used this information to provide what the customer needs. This has been a better way of maintaining a competitive advantage in the market since they are customer focused (Erin 2008).
There are important things that the Yahoo company has learned about customers in the market through the surveys. First the customers a do not want doom and gloom; they always want to get to know about positive things and innovations that can work for them. The company because of this provides inspiring stories to their users that have innovative ideas and possibilities. Through this there are many users who attracted to using the services of the company (Erin 2008).
Conclusion
The Yahoo company despite great competitive challenges in the market it has managed to maintain its competitive advantage. The journey has not been that smooth there are several challenges it has faced but for each challenge, it has managed to get a long-term solution. Because of this, the company enjoys several competitive advantages in the market like a huge user base and a variety of products.
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