2.2. Examining competition and strategies in television industries
2.2.3. Strategies
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as well. Barney and Hesterly (2006) also cited the example of data storing companies working together to develop a common technology standard to maximize storage on storage devices.
However, as companies formed a complementary relationship in one aspect such as maximizing the value of the service/product in the industry and increasing the size of the market, they may become competitors so as to gain the maximum share of the market.
2.2.3. Strategies
As industry competition is heavily influenced by companies’ strategic decisions in their respective industries, strategy-making became an increasingly important process among top-level management in the companies. Such trend is also observed in academic research, where business and strategic management forms an important discipline in its entirety (Porter, 1979; Porter, 1980a; Porter, 1980b; Johnson & Scholes, 1988; Bourgeois, 1996; Botten & McManus, 1999;
Barney & Hesterly, 2006; Porter, 2008). In devising strategies, Botten and McManus (1999) stated that firms must first scan external and internal environments to identify possible SWOTS.
Porter (1980b) commented that the five competitive forces can jointly determine the intensity of industry competition where the strongest force(s) then become a crucial aspect in strategy formulation. Porter (1980a) also stated that by developing competitive strategy, a company or business unit can find a position in the industry where it can ‘best defend itself against the competitive forces or influence them in its favor’.
Similarly in media management-related research, the various aspects and dimensions of strategies are extensively examined considering the influences and impacts of strategies employed by the companies on consumers and the industries (Liu, 1997; Compaine & Gomery, 2000; Li & Chiang, 2001; Edge, 2004; Hoskins, McFadyen & Finn, 2004; Li, 2004; Liu, 2005;
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McGrail & Roberts, 2005; Chan-Olmsted, 2006; Albarran, Chan-Olmsted & Wirth, 2006; Fu &
Wildman, 2006). In particular relevance to media industries, Chan-Olmsted (2006) specifically stated that the formation of a strategy involves the alignment of the firm’s internal resources with consideration of opportunities and threats of the changing market environments to develop competitive advantages.
Strategies can be generally classified into Corporate Strategies and Business Strategies (Bourgeois, 1996; Botten & McManus, 1999; Albarran, Chan-Olmsted & Wirth, 2006; Barney &
Hesterly, 2006; Chan-Olmsted, 2006). Corporate Strategies are actions usually decided on a company level, where the company decides which industries or markets they will compete in (Bourgeois, 1996). Barney & Hesterly (2006) explained that these strategies are taken by the company to gain competitive advantages by venturing in multiple markets/industries simultaneously. Strategies in this category include Vertical Integration, Strategic Alliances, Diversification, Mergers and Acquisitions (Barney & Hesterly, 2006).
Chan-Olmsted (2006) stated that such strategies are playing increasingly significant roles in shaping today’s media industries where multinational media corporations are expanding across product and geographical markets. Citing examples of Viacom, News Corporation, Disney, NBC Universal and ITV where there were various mergers and acquisitions, Albarran, Chan-Olmsted and Wirth (2006) also commented that the use of such ‘growth’ strategies resulted in ‘increased economic efficiency through economies of scale and scope’, where the companies leveraged on the increased market power in both audiences and advertisers to maximize market share and revenue.
Business Strategies are determined at the business unit level of the company, where the company decides how it will compete and gain competitive advantages in a single industry or
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market, which is why business strategies are often also known as Competitive Strategies of the business unit. Porter (1980) proposed that Competitive Strategies are defined as ‘taking offensive or defensive actions to strengthen a company’s position in relation to the five competitive forces’, where a company take strategic moves to improve its market position, influence the balance of the five competitive forces or anticipate and respond to changes in the five competitive forces (Porter, 1980). Specific strategies belonging to this category include Cost Leadership, Focus and Product Differentiation, where they can be used individually or in combination (Porter, 1980).
Cost leadership focuses on companies gaining advantages by reducing their costs to below those of their competitors while product differentiation is employed when companies attempt to gain competitive advantages against competitors by increasing the perceived value of their products/services. Porter (1980a) explained that the focus strategy as adherence to its name, focus on catering to the needs of a particular buyer group, product segment or geographical market. Barney and Hesterly (2006) listed some examples where cost leadership and product differentiation were used extensively by industries. For example, Wal-Mart in the supermarket industry, Hyundai in the automobile industry and Casio in the watches industry advertise and emphasize on reliability and low prices as selling points, as compared to their competitors.
Brands such as Victoria Secret, Rolex and Mercedes on the other hand, adopts a product differentiation strategy against their competitors in the lingerie, watches and automobile industries respectively (Barney and Hesterly, 2006).
In relation to media industries, Picard (2010) observed that product differentiation in media industries is dependent on the variety of elements related to content, the timing when the content is made available, distribution, and production choices where companies are able to target specific audience groups based on demographics, characteristics of the audience groups,
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differentiate content in multiple ways will be increasingly heightened with information and communication technologies, to which content can be personalized, catering to the interests, needs and requests by specific audience groups. Picard (2010) also identified two forms of differentiation in television industries: product differentiation and audience differentiation.Table 2.2. Product and audience differentiation in television industries
Product Differentiation Audience Differentiation Television Industries strategic choices may shift from differentiation to lowering costs and prices (cost leadership) to compete for the largest and most desirable audience and consumer groups. The table below summarizes the type of strategies applicable.
Table 2.3. Applicable strategies in industries
Types of strategies Corporate strategies Business strategies Vertical Integration
(Source: Porter, 1980a; Barney & Hesterly, 2006; Picard, 2010)