Yahoo Strategic Plan 1

Running Head: Yahoo Strategic Plan

Analysis of strategic planning on Yahoo Company

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Summary

Yahoo can be likened to the popular yellow pages; this is because it provides a valuable

and fast source of information to the entire world. It is used by more than three million people

and is considered to be one of the leading internet businesses. Even though, Yahoo gained its

reputation and is one of the biggest search engines in the world, it has to deal with a lot of

competition emanating from AOL and Google. These companies exert a lot of effort to develop

their websites search engine features everyday. Therefore, this has lead to a major decline in user

traffic on Yahoo’s sites and also affects the company’s revenues. On the other hand, Yahoo

manages its services and products as a long-term focus since it believes that this is the best

method of running business. Nevertheless, the company believes that in order to compete with

Google and AOL, it must continue to respond to the changing market and remain as a familiar,

trustworthy media source. Summarily, the company’s corporate information and an overview of

its operations, mandate in terms of vision, mission, values and stakeholders are evaluated. The

fundamental components of the company's internal environment including employee-employee

and employee-management relationships, work structures, organizational behaviors, ethics,

financial position, products and employee incentives are discussed. External environmental

factors which characterize the company's operations like competition, growth strategies,

competitive strategies and market positions are also deduced. Finally, the various strategies used

by yahoo in terms economic models, differentiation and control are discussed with economic

model chosen as the best strategy to adopt. The paper does not include yahoo strategic options

and recommendations.
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Introduction and Yahoo Company Overview

Jerry Yang and David Filo developed the Yahoo search engine in the year 1994. They

created it at Stanford University. Initially, they only developed Yahoo to their relatives and

friends, but, soon their search engine extended among students at the Stanford campus. A year

later, Yahoo was made accessible to the public and started selling advert space. Based on the

research study, the objective was to develop a user friendly and faster internet search engine,

with improved display capabilities that allowed for general and specific/ customized searches.

Consequently, in the year 1998 the two young entrepreneurs formally obtained legal ownership

of Yahoo.com domain while Yahoo Company became a legal entity (incorporated), in

California, under the US corporate laws a year later. Through the new concept that enhanced

internet search, the company has registered tremendous growth, and it has over ten thousand

employees worldwide today. According to Pringle, Allison and Dowe (1998), among the search

end online advertisement companies, Google Company is the largest, though its yearly growth

rate is over 45%.

Table 1: Tangible facts about the company

Entry Description

Yahoo Headquarter San Francisco

Category internet

Size More than 20,000 Workers

Average revenue $ 15 000 millions (2009)

Founded 1998

Source: http://www.google.com
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Mandate

Mission and core company purpose

Yahoo’s company mission, which also represents its core purposes, is: “to organize the

world's information and make it universally accessible and useful" (yahoo, 2010). Through the

mission, Google seeks to be an organization that enables people to have unlimited access to

specially collected and organized information globally. It ensures that people can communicate

effectively and efficiently via yahoo mail.

Vision and Major Goals

Yahoo’s major goal is to offer the best products in market, be the market leader and

expand globally. Through its vision, it seeks to ensure existence of an informed society that has

access to current information as it emerges and when needed.

Core Values/Working Principles.

Yahoo Company has ten basic principles which are referred to as 'Our Philosophy'. The

guiding principles employed in pursuit of success include valuing and recognition of the

customers, offering best quality products, fast-tracking processes, giving the web users freedom

to use their services responsibly, investing more on mobile services, make money ethically,

gather as much information as possible on consumer needs, disseminate information globally,

take challenging tasks positively, and there is need to go beyond the expectations (Yahoo, 2010).

Analysis of the company stakeholders

Stakeholders wise, Yahoo's leading stakeholders are the customers whose needs are met

through competitive and quality products, the employees who need recognition, compensation,

motivation and development, the equity investors who need return on investment through

dividends and the governments which require ethical and legal business practices. There are also
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the management who make major decisions, and are also entitled for rewards and compensation.

Lastly, there are the surrounding communities which require that the company conducts its

business responsibly and within the law. Green and sustainability oriented business, if followed

to the latter will enhance consumer trust on the products supplied to them.

Internal Analysis of Yahoo

This includes the strengths and its weaknesses. Internally, yahoo values its employees.

This mission is achieved through regular trainings and academic fee reimbursement programs.

Company has been constantly upgrading its equipment to ensure efficiency hence quality

product. This is facilitated by the experienced quality staff that is fully committed in realizing the

objectives of the company. In order to stay competitive in the market, the company has improved

its efficiency in delivery of services. The radical changes in technology carries the risk of making

tools and equipments acquired to be obsolete. A lot of resources have been used to acquire these

tools. The constant changes in technology require the company to constantly train its staff. This

is very costly processes which reduce profitability of the company. The staff is an asset to the

company. Additionally, the company has integrated and construction resources which have

enabled it deliver tailored solutions to the clients. At the same time, the management and the

organizational culture has ensured that a good working environment exists in the organization.

To fully tap the employee's talents and creativity, the employees have been given a considerable

degree of freedom in relation their duties.

At the same time, the employees' welfares are adequately catered for by the company

through such incentives as health care, insurance, motivation, and monetary rewards. The

motivation to ensure that the employee welfare is taken care of has been to optimize the

resources available and the internal organizational working environment. The internal
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environment that the company operates in is professionally evaluated through strategic plans to

ensure that all the controllable variables that may affect the company’s business are successfully

identified and managed. The internal environment of the company, among other things, is

characterized by quality and diverse product ranges, research and development, proactive human

resource management, accountable and participatory leadership, existence of team work, flexible

job schedules, innovations and shrewd conflict resolution strategies.

To ensure that its strengths are upheld, the company’s management collaboratively

strives to ensure that there is not only quality and functioning products but also that the products

are offered in wide ranges. The motivation is to ensure that as many clients as possible are

captured, while they are given many choices due to differences in tastes and preferences.

Innovative product development and creative improvements have resulted into the company's

market control. This has been possible through the IT labs that the company has put in place as

well as good leadership system that allows for and rewards personal/individual innovative

initiatives.

Hill (2006) describes yahoo search engine as an “amazing tool that allows the user to

Access Sea of information contained in billions of Pages and retrieve the precise information”

needed (p.1). For example, the yahoo Alerts such as news and web alerts gives automatic alerts,

mainly through email upon subscription, about breaking news or leading web pages at a given

time. The alerts serve as sources of strength to the company as most people in the current

information society strive to get latest news and events as they unfold. Similarly, the company

has book search engines through which consumers can search for and locate materials of interest.

The company also has a multi-lingual web directory that allows consumers to selectively browse

given sites. Yahoo map is another famous product that is built on satellite technology and the
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search engines. This innovative product that has three diagram dimension images allows people

to locate geographical images of a place irrespective of one's location. This illustrates the

strength of yahoo internal environmental management that is based largely on innovation and

creativity. Application of graphics in yahoo finance product further shows the strength of the

company in the IT world. Through this product, the consumers are able to get analytically and

graphically presented financial information of companies as well as the related data of the

industry and competitors. Ability to access these products in different languages further gives

yahoo competitive edge and possibility of further growth due to the wide base of its reach.

The financial status of yahoo Company underscores the strengths of its internal

environment. Exponentially, the company has recorded steep revenues growth since its

incorporation. This growth is attributed to astute financial management as well as existence of

strong control systems that are hard to beat. At the same time, the growth in the company’s

revenue flows is based in the ability of the management to forecast into the future and take

advantage of the existing market opportunities. The management of the company has been able

to take advantage of the rapid revolution and emergence of the internet technology to exploit the

market opportunities more so the online adverts and benefit from it. To improve its internal

revenue stream, the company in the year 2006 went public, by floating over, 19 million shares at

85 USD a share. The public listing of the company greatly enhanced the strength of its internal

environment and raised its market value from 1.7 Billion USD to about 151 billion USD after the

floatation. Currently, the company’s market capitalization is over 170 billion USD, while

Google, the closet competitor has 23 USD as shown in the chart below:
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Table 2. The Market share of internet information providers companies.

Company Price % change Market share Company

symbol

Yahoo Inc. 545.32 0.79% 173.40 Billions YHOO

Google! Inc. 15.57 1.02% 22.06 Billions GOOG

Baidu, Inc. 517.02 0.36% 17.97 Billions BIDU

Netease.com Inc. 37.08 1.85% 4.80 Billions NTES

Akamai Technologies Inc. 28.12 2.44% 4.81 Billions AKAM

AOL, Inc. 24.52 0.33% 2.59 Billions AOL

Source: http://yahoo.com/q/in?s=GOOG

Key: decreasing percentage

Increasing percentage

With such a strong capital base, coupled by excess budget surplus, the company has been

able to meet its internal cash requirements easily without need for capital debts. As such, the

management and strategic decisions are not influenced by external players like lenders of

finances. The management can therefore make quick decisions without fear of reprimand from

third parties whose loans were advanced to the company.

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The strength of Yahoo internal environment as evidenced by health books of accounts

can also be shown by the growth in its sales volume. For example, the company's sales value in

2006 was about 109 million USD while on the year 2008; the figures were over 3 billion USD,

representing over 1500% sales growth. At the same time, the company’s market performance in

the bourse has been very impressive as shown the graph below:

Table 3 Technical analyses of Yahoo Company

Information source: http://yahoo.com/q/in?s=YHOO

These growths have ensured that the company has excess cash floats which have been

used for further investment and expansions. To strengthen the areas of weaknesses in its product

development and promotion, the company since its inception is known to invest heavily in

Research and Development. For example, a historic 2.1 billion USD was used in R&D in the

year 2009, representing about 75% growth from the year 2008. Notably, the company has been

undertaking extensive research on how to diversify its products and venture into new areas such

as Television adverts and Android and mobile telephony industry (for more information on

financial performance of Yahoo see appendix 1).

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External analysis of Yahoo

In its industry, Yahoo Company is the leading and dominant player. The quality and

superiority of the products and services give Yahoo an advantage over its competitors. These

competitive advantages imply that the company's strengths and opportunities outweigh its

weaknesses and threats as espoused in the SWOT tool. Comparatively, in the display of search

advertisement, the main yahoo's rival, Google, has eleven less search displays. Illustratively,

there were over 18 million and 9 trillion advertisement clicks for Yahoo and Google

comparatively in December of the year 2008. From the online advertisement the company

managed to get revenue of about 3.7 US Dollars in 2008, representing nearly 72% of the total

online ad revenues in America (Lohr, 2007). This serves as a source of strength for the company,

what can be used as a tool for competitive advantage and maintenance of market share.

To take advantage of the existing market opportunities and minimize the possible threats

posed by the external environment Yahoo Company has been expanding its operations to

different geographical regions, both in mature and emerging markets. According to Michael

(2003), the company has global distribution of products and services, while its regional offices

are located in strategic countries from which the regional operations are coordinated. The

essence of this has been to have a global network of operations. That has enhanced yahoo's

market rating and led to emergence of more opportunities for the company. A threat to yahoo's

internationalization process however has been unfavorable political, economic and social factors

in some regions, as outlined by the PEST Tool of analysis. In china for example, due to unfair

business climate that is characterized by internet censor by the Communist government, the

company announced a pool out from the heavily populated market in February 2010. This is

further compounded by the Confucian culture in china where the natives are very rigid to change,
 Yahoo Strategic Plan 11

are less individualistic and mainly influenced by social forces. This decision, though necessary

due to politically instigated interferences with business management, might be

counterproductive. The competitors will certain take advantage of the pull out to fill the vacuum

left while Yahoo will lose out the revenues that were likely to be drawn from the over billion

people market.

Threat to the company's growth, especially into the third world countries and developing

countries, may also result from the low economic strengths of these markets. As a result, the

company may not be able to meet its growth plans due to constricted revenues streams. At the

same time, the low purchasing power of the consumers means that the products offered for sale

may not attract many users, or those who are ready to use them at a fee may prefer relatively

lower rates, in comparison to the mature markets.

The external Yahoo's environment is also noted by its competitors in the industry.

Nevertheless the company has a variety of product ranges, making it have many competitors,

with very few sticking out exclusive rivals in specific areas. The main competitor of Yahoo

Company is Google. Other significant market rivals are Microsoft Incorporation and Ask.com.

The competition between Yahoo and Google, that has significantly shaped the IT industry, is

mainly existent in the similarities in some of their main products and services. Both companies

offer online ads, emails, and maps. At the same time both have search engines and graphic based

financial analyses of leading global companies. Impliedly, to manage the threats posed by Yahoo

in provision of these services, Yahoo needs to be continuously innovative and also have positive

synergy in pursuit of its goals and objectives. The concern is very crucial given the high level of

competition in the market, similarity between Yahoo and Google's product design and

distribution systems. Specifically, the current intensity of Yahoo and Google's competition, in
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the industry comes from the new Yahoo products. An opportunity which Yahoo can capitalize on

however is its ability to aggressively market its products to the extent that nearly all its products

commands over 53% market share where they are on sale. Research findings by Michael (2003)

further support this argument, that is, Yahoo, in overall accounts for over 60% of its industry's

sales.

Strategy

The current turbulent business environment calls for proper strategies used in all

company's undertakings. In order for the company to outwit competition and realized high profit

margin, efficiency in the business operations is inevitable. Yahoo Company has designed

several which are ably implemented to consolidate its market position and augment its market

competitiveness. To date, the number of companies that Yahoo has acquired stand are many.

These acquisitions and market differentiations have greatly aided the company to implement a

growth/economic oriented business model that is international seeking. When the plan to develop

yahoo Docs was to be implemented, it was the purchase of Writely Inc that led to full

implementation of the business concept. Writley was bought because it had experience in online

processing business. To further widen its portfolio and spread its risks, Yahoo acquired another

company, thus venturing into the multi billion internet based industry.

Additionally, Yahoo's strategy involves acquisition of its competitors as the case of

Double-Click in 2008. As such it has managed to keep off some competitors off its market while

at the same time expanding its networks and products to expand its economic base. The

company's control strategy is based on intergraded approach. This matrix like system is

characterized by practice of clan control and a set of rules and regulations (bureaucracy). The

managerial/ control strategy used encompasses company's board and a team together of
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executives who wiled formal authority. Economic model and market control approaches have

also been employed by Yahoo to manage its corporate affairs. For example, performers are

handsomely rewarded while poor performers, including top managers, often face demotion or

reshuffling. For the company to be competitive in the market, it is imperative to observe more

marketing strategies. It is however paramount for the company to offer products and services that

are quite outstanding in the market.

The intense competition that exists in US and Canadian markets poses challenges of

lowering the volume of revenue to the company. Price competition is another alternative to

attract more clients. The effective production systems will allow the company to deliver quality

services at lower prices. The market situation reflects the need to venture into newer markets in

more so in developing countries. It is advisory for the company's top management and the

economic planners to be prompt enough to discover the new and viable markets to be discovered.

In order to build larger client base, the company has to spend great deal of resources in

marketing the products in the new markets. Clan control strategy has been adopted by the

company to improve the interpersonal relationships and enhance collaborative work behavior. As

such the employees' behaviors have been modified to suit this strategy, where they recognize and

appreciate the need for harmonious work relationships, share values and dream for a better

Yahoo.
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References

Hill, W. (2006). Internet search and the Rise of yahoo. University of Washington retrieved from

http://www.yahoo.com/corporate/tenthings.html on 7 March 2010

Lohr, S. (2007) Yahoo Deal said to bring U.S. Scrutiny,” Retrieved from

http://www.nytimes.com/2007/05/29/technology/29antitrust.html?ex=1181880000&en=c

3dae549fa6381ad&ei=5070 on 7 March 2010.

Michael p. (2003). Analyzing Yahoo rankings through search engine optimization data, Emerald

Group Publishing Limited, vol. 17

Yahoo Company (2010). Corporate Information. Retrieved from

http://www.yahoo.com/corporate/tenthings.html on 7 March 2010.

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Appendix
Appendix 1 Income statement of yahoo
PERIOD ENDING 31-Dec-09 31-Dec-08 31-Dec-07
Total Revenue 23,650,563 21,795,550 16,593,986
Cost of Revenue 8,844,115 8,621,506 6,649,085
Gross Profit 14,806,448 13,174,044 9,944,901

Operating Expenses
Research Development 2,843,027 2,793,192 2,119,985
Selling General and Administrative 3,651,235 3,748,883 2,740,516
Non Recurring - - -
Others - - -

Total Operating Expenses - - -

Operating Income or Loss 8,312,186 6,631,969 5,084,400

Income from Continuing Operations

Total Other Income/Expenses Net - (778,373) 590,783
Earnings Before Interest And Taxes 8,381,189 5,853,596 5,675,183
Interest Expense - - 1,203
Income Before Tax 8,381,189 5,853,596 5,673,980
Income Tax Expense 1,860,741 1,626,738 1,470,260
Minority Interest - - -

Net Income From Continuing Ops 6,520,448 4,226,858 4,203,720

Non-recurring Events
Discontinued Operations - - -
Extraordinary Items - - -
Effect Of Accounting Changes - - -
Other Items - - -

Net Income 6,520,448 4,226,858 4,203,720

Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares $6,520,448 $4,226,858 $4,203,720

Source of information: http://Income.yahoo.com/q/in?s=GOOG