Strategic Management - Yahoo Case Study

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Executive Summary

Yahoo is one of the World Wide Web’s (WWW) leading search providers, and most prominent web portal. It was established in April of 1994 and was originally called “Jerry’s Guide to the WWW” (Hill & Jones, 2008). Today Yahoo employs around 11,000 people and, in 2006, averaged 144 million views per day (Hill & Jones, 2008).

The company has achieved its success by offering its users a variety of different services including: email, instant messenger, search, news, sports, stock quotes, and entertainment. Currently, analysts are unsure of Yahoo’s actual role as it functions as a myriad of purposes (Hill & Jones, 2008).

Despite Yahoo’s past success, the future is unclear about what success they will have as they seem to have lost sight of their mission and original business model – the search function. Also, with Google garnering more advertising revenues and popularity among both internet users and companies wanting to advertise, it seems as though Yahoo will have an increasingly more difficult time competing.

Introduction

Yahoo is one of the top search providers of the WWW and most prominent web portal, with over 144 million views per day (in 2006) (Hill & Jones, 2008). However, due to the competitive nature of the dot-com industry, and the emergence of Google, Yahoo is in need of a clearer business model that will take them through the next decade.

This review will look at Yahoo’s past and current situation beginning with a brief overview of the company. This will be followed by an evaluation of the external forces at play, specifically the macro and competitive forces that shape the competitive dot-com search engine industry. Lastly, the internal environment will be analyzed.

This document is based on the case Yahoo (Hill & Jones, 2008, p.C102-C114) with no access to financial statements.

Company Overview

Yahoo originally started out as a way for David Filo and Jerry Yang, the founders of Yahoo, to remember their favourite sites – more or less how we currently use the bookmark feature today, but on a much larger scale; as the list grew they categorized the websites, and later into subcategories. In 1994 Filo and Yang published their website so as to make it available to their friends (Hill & Jones, 2008).

In the beginning, Yahoo’s business model was to capitalize on renting advertising space on their web directory pages. With the growth of their company they soon needed to invest in sophisticated IT infrastructure and found backing with Sequoia Capital, who insisted that they hire experienced executives to take control of developing Yahoo’s business model further. Filo and Yang hired Tom Koogle as their Chief Executive Officer (Hill & Jones, 2008).

Koogle’s vision for Yahoo was to turn it into the most useful and well-known web portal by making it a global communication powerhouse, enabling users to connect with anything or anyone on the internet, linking people to information. Koogle also envisioned Yahoo as being a retail channel which would link buyers and sellers, facilitating the new idea of internet shopping. Over the course of a decade, Yahoo acquired many services including: email, instant messaging, stock quotes, news, personal ads, and job ads. Later, they enabled advertisers to better target their advertising to specific demographics, which increased the amount of users who were clicking on their ads. The targeted advertising translated into more profits for the advertiser. These features increased Yahoo’s stock price to $237.50/share in 2000 (Hill & Jones, 2008).

However, in 2002 their stock was valued at only $9/share (Hill & Jones, 2008). This was due in part to the dot-com bust, but also the poor managerial skills of Tom Koogle – he had spread the investment of the company out, focusing on nothing in particular. Due to poor performance, he was replaced by Terry Semel. Semel’s business plan was to revamp Yahoo by introducing new content and services...
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