Blog #2: Internal Organizational Analysis

This week's readings allowed us to understand the importance of reflection i.e. internal analysis had on the business strategy of the company. I wanted to critique two companies that did not achieve the heights they should have majorly because one stayed the course even when the market around it changed and the second tried to seek synergies by merging with firms with complementary offerings [1].

Britannica

Britannica was a hugely successful company selling encyclopedias for majority of 1900’s. By late 1980s Britannica had differentiated itself from the rest and established trust among its customers (majorly the parents who wanted the best for their children). What changed for them when Microsoft came out with Encarta? Well, they stayed the course. When the market was changing and moving towards digitization, they did not respond fast enough. They believed that their brand value and the effective sales-force will still allow them to remain profitable, but they failed to understand this shift in the market. [1]

“Executives too often kid themselves into thinking that the problem isn’t so severe or delay reaction till it is too late”. [1] Britannica failed to react till it was too late and even when they did respond, they tried to protect their old business model in the changing environment which eventually led to their fall.

Hulu

Companies often seek to growth by merging with or acquiring other firms that have complementary offerings. In theory, the whole should be better than the parts but that isn’t always the case. Hulu was created out of a novel partnership of three big studios – NBC, Fox and Disney [2]. In theory, with these big names on the board, it should have guaranteed Hulu a long-term success over its competitors but even now, Hulu is far from being the best in the industry. Competitors like Netflix are far ahead. There are three main reasons behind this-

1. Ownership Structure - the partnership between the three giants was more a weakness than a strength because why would a company share it’s premium content when the profits were being equally divided in three?

2. Organizational Structure - Selling on-demand videos represents a new way of creating, distributing and profiting from content. But since Hulu failed to align its structure with this opportunity, it’s divisions never really aligned with the new opportunities. The divisions did not want to put in their best content on Hulu fearing a loss of profit for their own division. [2]

3. Global Presence - Hulu’s global penetration is practically zero since it is only based in US. This seems really counterproductive to me when all its competitors- Netflix, Amazon, Google, have gone global and acquired international customers.

The role of synergies can be clearly seen in Hulu’s example. The risk was overlooked just because three big names were under the table.

References:

[1] Mui, Chunka; Carroll, B. Paul (2008) Seven Ways to Fail Big, Harvard Business School Press

[2] Telang, Rahul; Smith, D. Michael (2019) Why isn’t Hulu Better https://hbr.org/2019/04/why-isnt-hulu-better

[3] Devereux, Michelle; Greenstein, Shane (2009) The Crisis at Encyclopedia Britannica

-- Shweta Dhar (shwetad@andrew.cmu.edu)