Introduction
Time Warner Inc is operating in a highly competitive media industry. According to Terpstra, Sarathy, and Foley (2012), media companies in the United States and in other places around the world are facing a challenging market environment due to the emerging popularity of the social media. These mass media companies are struggling to remain relevant in a market that is shifting very fast. Time Warner Inc finds itself in a position where it is not just competing with other major mass media companies but also the social media that has become an alternative to the mass media, especially among the youth.
How Time Warner Inc Has to Strengthen Its Generic Strategy
Time Warner is currently one of the leading media companies that offer a wide variety of products to the international audience. This company has faced numerous challenges in the market, but its effective marketing strategies have helped it overcome these challenges. Since it was founded, this firm has been using offensive strategies to expand its market share. It has been doing this by creating new products in the market and acquiring other struggling media companies to expand its product line and international market share. According to Wallusch (2016), when using an offensive strategy in the market, a firm must be ready to face the reaction of rival firms. In 2013, Comcast acquired NBC Universal, which is a media conglomerate owned by General Electric at that time (Williams, 2016). This was seen as a response to the decision made by Time Warner Inc to merge with AOL. In response to the move made by Comcast, currently, Time Warner Inc is almost closing a deal that will see it merge with AT & T. The resulting company will be the biggest media, entertainment, and cable industry in the United States. It is a clear sign that this firm is using offensive strategies in the market. It does not fear to create stiff competition as long as it is able to expand its market share.
Timing of the Strategic Moves
According to Hall and Yip (2016), timing is very important when making strategic moves. When a firm makes the wrong timing, it may be dangerous as it may lose its market share, and the expected outcome may not be achieved. Time Warner Inc has been keen on acquiring small firms at a time when these firms are struggling to make it through in the market. This strategy allows the firm to pay a relatively lower fee when making the acquisition compared with cases when these firms are performing well. The decision by AT & T in 2016 in an electioneering year was also considered strategic. During this period, Americans and many other people around the world were always glued to American international media outlets. Most of these media outlets, such as Cable News Network (CNN), which is owned by Time Warner Inc, became very popular locally and internationally. The decision to enter a business deal at such a time was very strategic. The company had a strong bargaining power in the merger. It is also important to note that the timing was effective, given the stiff competition in the global market. Through this merger, this company will be in a better position to compete favorably with its major market rivals.
Complimentary Strategic Options
According to Rumelt (2011), successful firms know how to develop strategic moves that will not only expand their market share but also make it difficult for their rivals to copy the strategies they are using. For Time Warner Inc, mergers and acquisitions have been the most common strategic option that it has been using over the recent past. The strategy allows this firm to reduce competition while at the same time, expand its market share. When merging with or acquiring a new firm, Time Warner Inc also acquires the market share that the firm previously had. The strategy has worked well for this firm, enabling it to overcome stiff market competition. The use of offensive moves is another strategic option that has helped this company. Instead of using defensive moves which are always reactionary in nature, this firm has opted to be proactive. Through creativity and innovativeness, it has been able to come up with a number of unique products in the market. The new products help it create new revenue sources.
Challenges and Benefits of the Complementary Strategic Options
The complementary strategic options chosen by this firm have advantages and disadvantages which the management must understand. The acquisition helps a firm to expand its market share quickly and without spending a lot in research. It also makes it possible for a firm to eliminate or significantly reduce stiff market competition. However, this strategy has a number of challenges. The acquisition is always more expensive than when a firm decides to expand its own operations independently. Sometimes a firm may make a loss when it decides to sell the acquired entity in the future. A good example is the Time Warner Inc. AOL acquired Time Warner Inc in the year 2000 at a cost of USD 264 billion. Sixteen years later, the same firm is about to be sold at USD 85 billion. Given the effect of inflation on the value of dollar within the last sixteen years, it is clear that the same firm has been sold at about 30% of the cost at which it was purchased. It is only logical for the firm to be sold at a higher price than that which was used to purchase it. The offensive strategic option is beneficial because it enables a firm to create an impact and curve its own market niche. However, this approach often creates stiff competition in the market as rival firms respond to the offensive strategic approach.
Strategies for Competing in International Markets
Media companies are forced to go global as they try to expand their market share. Competing in the international market requires a number of strategies that will enable a firm to overcome global market challenges. It is necessary to look at the strategy that Time Warner Inc has been using in the international market.
Strategies for Foreign Market Entry
Time Warner Inc has been using mergers and acquisitions to enter some of the global markets, especially in East Asia and parts of Europe. In Africa, the firm has been using a strategic alliance with some of the local media stations. In this strategic alliance, these overseas media stations would air CNN news exclusively at a given fee. These overseas media stations would pay Time Warner Inc a given fee for airing its content. This approach has been effective because it does not require this firm to invest in infrastructure and labor in the foreign markets to make its products available. The emergence of digital television platforms has made it possible for Time Warner Inc to make direct market entry into the foreign markets. Customers can now subscribe to and watch Time Warner movies in any part of the world. They can also subscribe to the television news outlets such as CNN at a small fee. The move is meant to protect its market share in the foreign markets. It is also in the spirit of the firm as it is offensive in nature.
Strategic Approaches to Competing Internationally
Time Warner Inc offers a wide variety of products besides the news channels. In the international market, this company has been focused on product development as a way of managing stiff market competition. The firm often comes up with new products for its customers. From news program to movies and other entertainment programs, this firm has been keen on meeting the needs of its target customers. It has also created a platform where people of different age group can get entertained without having to interfere with other group of customers. There are channels and movies meant for young children, teenagers, young adults, the middle aged, and the aging population. Their needs are effectively met with programs that are designed specifically for them. This unique approach to managing stiff international market competition has given it an edge over its market rivals.
Ways of Gaining Competitive Advantage from International Operations
According to Thompson (2016), one of the reasons why many firms go global in their operations is to gain competitive advantage over their market rivals. This firm has been keen on finding ways of gaining competitive edge over its market rivals through its international operations. Operating in the global market increases the revenues of this firm. Instead of just targeting American market, this firm is able to earn more revenue from Asia-Pacific, Europe, and Africa. It means that the firm is making more profits than its rivals operating strictly in North America. Operating in the international market also cushions the firm from harsh economic forces in the local market. For instance, 2008 economic recession affected many countries around the world, especially those in North America and Europe. However, countries such as China were not adversely affected. During that recession, revenues from operations in Europe and North America dropped. However, the firm was able to overcome the harsh market forces locally because of its global operations.
Recommendations
It is clear that Time Warner Inc is keen on achieving success in the global media industry despite the stiff market competition that it faces from its rivals in the market. The level of competition is expected to get stiffer, and the only way of dealing with that competition is for the firm to reevaluate its operations and come up with better strategies. The following recommendations should be considered.
- The firm should consider making an entry into the social media industry because it is becoming the future of communication. It can do this through merger and acquisition.
- The management should focus more on creating content that is expected by each of the target audience.
- It may be necessary for Time Warner Inc to invest more on research. It must always embrace change through creativity and innovativeness.
References
Hall, D., & Yip, J. (2016). Discerning career cultures at work. Organizational Dynamics, 45(3), 174–184. doi.org/10.1016/j.orgdyn.2016.07.003
Rumelt, R. (2011). Good strategy, bad strategy: The difference and why it matters. London, UK: Profile.
Terpstra, V., Sarathy, R., & Foley, J. (2012). International marketing. New York, NY: Naper Publishing Group.
Thompson, A. (2016). Crafting and executing strategy, the quest for competitive advantage: Concepts and cases. New York, NY: Cengage.
Wallusch, J. (2016). International TV market selection. Case study of Time Warner Inc. Hoboken, NJ: Wiley & Sons.
Williams, E. F. (2016). Green giants: How smart companies turn sustainability into billion-dollar businesses. New York, NY: Cengage.