Yahoo - Strategic Management Analysis

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EXECUTIVE SUMMARY

Yahoo! Inc., over its journey of almost 17 years has become the world’s largest online network integrated services provider with users exceeding 500 million in numbers worldwide (Yahoo FAQ, 2012). It has a presence in more than twenty markets and regions across the globe and is best known for its search engine and host of other services like finance, e-mail, advertising and social media.

Yahoo! Inc. was started as a personal website directory by two doctorate candidates at Stanford University named David Filo and Jerry Yang. Filo and Yang realized the potential of generating revenue from their web directory by allowing companies to advertise their products on their online directory. Soon, Yahoo was notable enough to gain the attention of Sequoia capital, a venture capital firm. Sequoia provided much needed capital to Yahoo and Tim Koogle, a Motorola executive was hired as Yahoo’s Chief Executive Officer. Koogle’s excellent management skills and vision took Yahoo to the new heights of success i.e. Yahoo! Inc.’s stock price rose from $5 a share to almost $244 a share in 1999 (Jones, 2007)

However, despite the leadership that the company enjoyed in its initial years, the company over the past years seems be losing market share to its arch rival Google Inc. Google has been outdoing Yahoo for the past many years now, gaining market share and increasing its customer base manifolds.

Over the course of past few years, Yahoo! Inc. made a slew of changes in its objectives, business model and to its external, internal environment and strategy to shore up its performance and regain lost ground to its main competitor Google. Herein, we shall take a close look at some of such factors through defining the company’s mandate, internal analysis as well as external analysis.

INTRODUCTION

The company under consideration Yahoo! Inc. (referred to hereinafter as “Yahoo”) is one of the world’s largest online network integrated services provider with a combined user base in excess of 500 million. Yahoo provides a whole host of network based services, however over its existence of past 17 years, many such similar service providers have shored up especially after the dot com boom. Some of these new players took the path of specializing in a particular form of service while others brought a whole gamut of new services with the old ones.

World Wide Web has grown exponentially over the past years giving rise to the intense rivalry between companies involved. This intense rivalry especially with the likes of Google is one of the biggest challenges for Yahoo.

In this case study, we try to first understand the backdrop in which the company is operating including its mission and vision for the future, its ultimate goals and philosophy regarding its business, its business model, external analysis based on Porter’s five forces model and finally internal analysis based on distinctive competencies, competitive advantage and profitability.

This document is prepared based on the information provided in the case, “Yahoo” (Jones, 2007) as well as numerous external sources such as Yahoo’s website and its annual reports circa 2011.

COMPANY OVERVIEW

Yahoo was incorporated as an Internet service provider that would serve both the users and the businesses globally. Yahoo was founded by two Stanford PhD candidates in January 1994 named Jerry Yang and David Filo. However, today Yahoo has become one of the world’s largest global online network integrated services provider. Yahoo today has a user base of 500 million per month. It has a presence in more than 30 countries worldwide and provides services in more than twenty different languages. The company presently operates out of Sunnyvale, California in the United States.

Yahoo first went public on the NASDAQ (YHOO) in the April of 1996. The stock had opened for $ 13.00 per share of the company and by the very day’s end; it had reached a closing of $ 33.00 per share...
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