MEMO

TO: Nancy Dobbs, President and CEO of Rural California Broadcasting Company

CC: KRCB Board of Directors

FROM: Yaniv Mizrachi

RE: Recommended Changes to KRCB's Strategic Plan

DATE: January 20, 2004

Executive Summary:

Given the company’s mission and objectives to provide and extend educational, cultural, and
informational service to the greater bay area community, I am recommending a series of
changes to your company structure and strategy regarding both radio and television broadcast
services. KRCB is in full compliance with all FCC standards and regulations, therefore, the
following is a list of objectives in order of importance that I have identified for your
organization; increase funding from all available sources, improve the efficiency of company
operations including human resources/ staffing and research and development, extend
coverage area (geographic) for services, enhance company relationships, networks, and
diversity. In this analysis, I will discuss aspects of the broadcast and the nonprofit industry,
and I will discuss the company’s current strategy in relation to its SWOT analysis. From the
conclusions illustrated by the analysis, I will explain creative strategies I have designed in
order to fulfill your objectives.
Industry Analysis - Five-Forces

Power of Suppliers – Federal Regulation

There is significant power of suppliers in the nonprofit sector of the broadcast

industry. This power lies with the Federal Communications Commission (FCC). The

FCC sets all major policies for public broadcasters and, is also responsible for the

issuance and revocation of licenses to broadcasters. In simple terms, the FCC supplies

broadcasters with access to communications in the same way that a farmer would supply

produce to a fruit vendor. Therefore, the FCC represents the first and most critical phase

of entry into the broadcast industry.

Power of Buyers - Fundraising

Nonprofit broadcasters provide a free service to the public therefore; the “buyers”

represent all sources of funding. The power of buyers is equally important as the power

of suppliers. I listed buyers second strictly because the suppliers control activity within

the industry. The buyers or financial sources are through grants from the Corporation for

Public Broadcasting (CPB), membership fees, donations, underwriting, auctions, pledges

and sponsorship. New technology also plays a major role in fundraising as discussed in

substitutes as a driving force in the industry.

Competitors

In spite of public broadcasting being a nonprofit industry, I would consider any

public radio or television station with overlapping coverage to be a competitor.

Competitors pose a threat to each other by consuming limited funds that are made

available to nonprofit organizations. The limits exist simply because the buyers (sources

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of funding) represent a similar audience or demographic to all of the competitors

involved.

Substitutes – Technology

New and emerging technologies are a significant threat to a source of sponsorship

funding in the industry by providing new media options to consumers. The industry is

realizing a smaller radio audience due to the introduction of satellite radio. The

television sector is suffering from the implications of new technology accessories such as

Tivo. The Tivo box is allowing viewers to eliminate commercials thus deterring

advertising sponsors from public broadcast channels. The Internet can be a potential

threat however; most broadcasters have undergone digital conversion and have the ability

to stream radio and television programs online. Also, a great deal of streaming media on

the Internet includes commercial advertisement that cannot be avoided by viewers and

listeners.

Competitor Analysis

Your radio station competes with two other public radio stations, KCSM and

KQED. All three stations cover one or more counties within the Bay area and all three

stations provide NPR news. There is slight variation in content among the three

channels, where your broadcast and KCSM attempt to provide specific music styles, and

KQED focuses almost entirely on news content.

I have identified three key competitors to your television station, KCSM, KTEH,

and KQED. There are many similarities in the program content offered by each

competing channel, which in turn indicates that all of you have a similar targeted

audience. In addition, KRCB and its competitors have overlapping coverage in several of

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the Bay area counties. For example, all four competing channels air in the city of San

Francisco. Here is a situation of redundancy in which all four competitors are targeting

the same market all within the same city exhausting and most likely diluting all possible

market potential. Your competitors also have similar if not the same funding strategies as

they all rely heavily on the CPB, memberships, and sponsorships, among other

fundraising activities. In conclusion, there are three critical success factors for KRCB

and its competitors’ strategies; maintaining realistic and focused goals to meet objectives,

the availability of opportunities to generate income, and geographic coverage capabilities.

Current Strategy and Issues

According to the information provided, KRCB’s current strategy appears to be

based on providing the maximum amount of media to the community pending budgeting

allowances. Clearly, all of you are devoted to the company mission as you continue to

give so much of your own personal time and skills in order to supplement unmet needs.

Unfortunately, the company is still suffering. The bottom line is that while your

strategies are logical, they lack focus, as well as operational and financial support.

KRCB’s greatest challenge is obtaining sources of funding in order to maintain a

secure financial budget. Another critical challenge that is dependent on funding lies in

KRCB’s operational structure including its staffing as well as its access to important

information from research and development.

Financial Performance

First and foremost, KRCB needs to strengthen its financial position. By gaining

financial power you will be able to allocate your capital towards support activities such as

acquiring important information through research and development. Moreover,

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increasing your financial capabilities will provide a larger budget for payroll in order to

hire permanent staff members to fill key positions. There is opportunity for financial

improvement within many aspects of the company. Some of these strategies are designed

to improve efficiency and therefore cut costs. Other financial strategies will be

implemented directly to increase dollars in the form of investment and donations to

KRCB.

SWOT Analysis

The strengths within your organization are your personal dedication to the

company vision, as well as the capabilities and professional skills of key personnel.

KRCB’s weaknesses exist mainly within its company operations. More specifically, your

financial operations and your staffing operations need major revision.

There are potential opportunities for KRCB to extend its coverage and

membership base, and also to improve its financial position and efficiency assuming

revisions are made to the current strategy. The most significant threat to KRCB is its

competitors in that they are all competing for funding from many of the same sources.

The overlapping in financial sources, as well as targeted audience and coverage areas can

easily diminish market potential for one or more competitors involved.

Options

All of the options listed are centered around the main objective of increased

financial stability. I have identified this as a priority need for KRCB so that management

will be able to maintain focus on other areas of maintenance and improvement in the

future. The first option is for KRCB to sell or close its radio station. This would remove

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a tremendous amount of financial burden immediately and allow the company to

consolidate the staff and equipment into one cause.

The second option is a horizontal merger agreement between KRCB and KCSM.

The merger would take place throughout both the television and radio stations. The

downside to this option is that KRCB and KCSM would have to compromise some

aspects of their company mission such as programming content during the decision

making phase of the merger. The outcome however looks very financially promising and

consolidating your staff, equipment, and programming would be relatively easy in

comparison to typical mergers of this nature. The table in exhibit 1 is a comparison of

KRCB and KCSM. There are far more similarities among your stations than differences.

I highlighted only the differences that exist in order to demonstrate this and to point out

specific areas that will require some compromise. The potential benefits to this merger

are innumerable. A particularly noteworthy benefit would be the access to a greater share

of grant money made available by the CPB. The available funds would be split among

only three television stations, and two radio stations, whereas CPB grants are currently

being divided among four television stations and three radio stations.

The following suggestions to improve your financial position and efficiency are to

be used in conjunction with one of the first two options listed. Much of your

opportunities to improve efficiency in cost and productivity exist within your

employment structure. In spite of your inevitable need for volunteers, interns represent a

potential opportunity to employ skilled talent at little or no cost, and with planned

turnover. I have a team of consultants that specialize in human resource management

that will work together with the board so that KRCB can offer appealing internship

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positions in order to fill key positions. Part of the incentive can be based on experience

and responsibilities, as well as offering a small stipend to interns at the point of

completion.

Adding new members to the board of directors based on a more eclectic mix of

skill and backgrounds can provide KRCB with access to a variety of additional networks,

therefore increasing word of mouth to encourage memberships, as well as an expansion

of KRCB’s targeted audience. Additions to the board of directors can also increase

efficiency in operations by encouraging board members to contribute his or her strengths

in skill and experience to the companies operations, yet another way of adding skill

without increasing the company payroll.

Recommended Strategies

I strongly recommend the suggested merger between KRCB and KCSM based on

the opportunities it will provide for financial strength as well as the relative ease of

consolidation. While the sale or closing of your radio station would free more capital, it

is not a substantial solution because it will be a temporary cure for an ongoing problem

with the budget.

In addition to the merger I also recommend the additional options to make

changes to board of directors’ standards, enhancing their networking opportunities, and

improving the quality and seriousness of internship positions offered. These suggestions

are ideally to be implemented after the proposed merger and consolidation however,

should you choose not to go with the initial recommendation, it is still possible to design

a strategy to implement these objectives.

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Exhibit 1
Proposal for Horizontal Merger between KRCB and KCSM
KRCB KCSM
Sources of Funding CPB CPB
Federal Grants Federal Grants
Fundraising Fundraising
Memberships Memberships

Television Broadcast
Coverage Areas Alameda Alameda
Contra Costa Contra Costa
Marin Marin
Mendocino Napa
Napa San Francisco
San Francisco San Mateo
San Mateo Santa Clara
Solano Santa Cruz
Sonoma Solano
Sonoma
Programming Children
Adult Adult
PBS PBS
BBC
APT
Local Programs Local Programs
GED courses College-level courses
Technology Digital Broadcasting Digital Broadcasting

Radio Broadcast
Coverage Areas Sonoma San Francisco
Marin Peninsula
South Bay Area
Programming NPR News NPR News
Classical Music Jazz Music
Local information and Jazz music education
shows

Technology Web Streaming Web Streaming

Broadcast 90.9 FM 91.1 FM 91.1 FM
*With regard to the differences in radio and television programming, market research reports will provide
simple statistics so that you can make the correct decisions about what programs to maintain and
programs to eliminate. For example, research shows that Sesame Street has strong ratings in the bay
area, as well as all most of the United States, therefore, this will be a program to maintain in a
consolidated television schedule upon merging with KCSM.

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