ERICSON N.

NARVARTE APRIL 01, 2023

BSHM – 3E SIR: PHILIP CHENG

CASE STUDY

 VIEW POINT
Yahoo! Inc. must focus on its market by implementing set of market growth,
market penetration, market development, and related diversification Yahoo! Inc.
must observe and learn to understand the rapid alternations in consumers
preferences. The need for Yahoo! with its numerous resources available, also the
promotion of youthful specialists, who are hopefully keeping the company up to
date in the future, using the market. Moreover, Yahoo! Inc. must set their vision
straight and have a concrete mission for their company’s future. Also, Yahoo! Inc.
must build a structured administration that has a knowledge of the industry which
would help the company.

 TIME FRAME
Yahoo!’s stock has risen dramatically in 2007 in anticipation of the effects of its
new search engine technology – called Panama. While Yahoo!’s stock has enjoyed
recent success, a serious concern for Yahoo! is the year-over-year growth of
quarterly earnings for 2006. Year over year revenues increased by 13.4%, but
earnings, slipped a staggering 60.7% Yahoo! finished 2005 strong with impressive
fourth quarter earnings, but the income slide at the of 2006, a sign of bad things to
come for a once-dominant web portal. Yahoo! continued this trend of declining
earnings as it announced its operating income for the first quarter of 2007 feel 16%
year-over-year. Revenue from both marketing services and fees increased (6% and
9%, respectively), but the company once again demonstrated its inability to
increase year-over-year income. Accounting for much of the decline were the
company’s high operating expenses, which increased 11.5% to an amount equal to
47% of revenue for the quarter. While the news of lower-than-expected earning is
troubling, the cause for the new is actually a sign that Yahoo! is Becoming more
forward-looking in its operations.
However, the beginning of the end for Yahoo! started. The conflict arrived in
2008 when Yahoo! Inc. lost its 1% income generated from rich media revenue,
another 1% from sponsorship, and 2% from classified ads. Yahoo! acquired only
17% of web traffic. The problem soared in 2009 to the point at which Yahoo!
closed its third video property, Maven Networks headquartered in Cambridge,
Massachusetts. They even proposed to shut-off 20 video service Geocities. Their
net profit shrank by 35.7% to $424 million, eliminated 657 jobs or 5% of its
workforce on the top of 2,500 jobs cut in 2008. Made a 78% decrease in profit
during the first quarter of 2009. Laid-off 700 employees to conclude with 13,000
employees and has an assertive cost-cutting.

I. STATEMENT OF THE PROBLEM

The primary aim of this case study is to propose solutions to the following short
coming of Yahoo! Inc.:
1. Yahoo! Inc. failed to meet the consumer’s preferences over time.
2. Their features and services are outdated.
3. Their income has consistently decreased.
4. The limitations of their internet services lose the interest of its consumers.
5. Throughout the year, Yahoo! Inc. has not had a concrete vision and mission
for their company’s future.

II. STATEMENT OF THE OBJECTIVES

(Classify Short-Term and Long-Term Objectives)
Objective for the Short-Term:
 Having a better user interface, making it user-friendly.
 A wider international reach
  Lower its attrition rate by hiring better people make progress in increasing
the volume and quality of the people joining Yahoo!
 Appointed talented employees who has knowledge about the industry and
fired other employees
 Make Yahoo! the absolute place to work
 Updated and fast to execute features

Objective for the Long-Term:

 Net Revenue: $1.09 billion vs $1.08 billion expectations.
 Operating income: $152 million vs $180 million expectations.
 EPS: $.35 vs $0.6 expectations.

III. AREAS OF CONSIDERATIONS (SWOT ANALYSIS)

Strengths and Weaknesses (Internal Environment)

Human Resources:
o STRENGHTS
1. Yahoo respects their employees and have a good collaboration with them.
2. They like to encourage employees to give their valuable idea and reward
them
3. They value their expertise
4. Strong employee base

o WEAKNESSES
1. Eliminated 657 jobs or 5% of its workforce on top of 2,500 jobs cut in 2008.
2. Laid off 700 employees to end with 13,000 employees
3. Fired five CEOs in five years
4. Poor organization structure
Operations:
o STRENGTHS
1. Yahoo has many secondary operations
2. Yahoo is the leader in providing brand-building, graphical video, and display
ads
3. Yahoo is a clear leader in content categories like Yahoo Finance, Autos, and
Real Estate.
4. Access available to anyone with internet access
5. Yahoo has far more service to offer its users than Google and may other
specialized sites
6. Strong distribution network.
7. Reliable suppliers through successful track record of integrating
complimentary firms through mergers & acquisition.
8. Low cost of introducing/updating products and service.

o WEAKNESSES
1. Slow rate of technological and intellectual innovation
2. Investment in Research and Development is below the fastest growing
players in the industry
3. Need more investment in new technologies
4. Yahoo has failed to protect its user’s accounts and data such as the cyber-
attack on 2014
5. Yahoo closed several websites and video specially one social networking site
Yahoo! 360.

Marketing:
o STRENGTHS
1. It was one of the pioneers in the early Internet era
2. Strong brand recognition, second best-known interactive web
portal
3. Highly successful at Go-To-Market strategies for its product
4. Yahoo Mail is available in 46 languages and 70 markets.
 5. Due to its large mail subscriber base, yahoo is considered to be the
powerful marketing company

o WEAKNESSES
1. The marketing of the products left a lot to be desired
2. Not very good at products left forecasting leading to higher rate of missed
opportunities compare to tis competitors
3. Tough competition from players affecting advertising revenues & allegations
of data leaks
4. As per Jan 2012 data, a survey says Yahoo’s market share in search engine is
only 6%
5. Yahoo is losing its market share in mailing services very gradually due to
Google’s strong presence in search engine market and its related product
portfolio complementing to search engine services.
6. Most of the services provided by Yahoo are unknown in the internet space
7. Decreasing demand for paid premium services

Finance:
o STRENGTHS
1. Good returns on capital expenditure
2. Its stock rose high up $120 in 2000.
3. Trading under $14 for most of 2009.
4. Yahoo revenue increased in 2007 to 2008 by 3.4% to $7.2 billion
5. Yahoo has a good profitability for several years

o WEAKNESSES
1. The profitability ratio and Net Contribution % of Yahoo are below the
industry average
2. The company’s assets both in terms of intangible and tangible are on the
declining side.
3. Yahoo net income lowers down from 35.7% to $424 million
4. More than $48 million long term liabilities and capital increase
 5. Poor short-term financial performance
6. Yahoo! Inc. lost 1% in rich media revenue, 1% in sponsorship and 2%
classified ads in 2008.
7. Advertising Revenue dropped by 13% to $1.58 billion in 2008

Opportunities and Threats (External Environment)

Economics:
o OPPORTUNITIES
1. The markets devoid of internet especially in the emerging economies can be
tapped by Yahoo
2. Decreasing cost of transportation because of lower shipping prices can also
bring down the cost of Yahoo’s products thus providing an opportunity to the
company

o THREATS
1. Vulnerability to economic conditions which cause a decrease in advertising
2. Since Yahoo derives most of its revenue from marketing services, any
deterioration in economic conditions causes decreases in or delays in
advertising spending and is likely to reduce the Company’s marketing
services revenues and negatively impact its short term ability to grow its
revenues

Politics:
o OPPORTUNITIES
1. The adoption of new technology standard and government free trade
agreement has provided Yahoo and opportunity to enter a new emerging
market
2. Strategic partnerships and launches
 o THREATS
1. Yahoo is at a risk of being involved legal intricacies due to breach of privacy
2. Restrictions applied by Governments in term of content
3. Liability laws in different countries are different and Yahoo may be exposed
to various liability claims given change in policies in those markets.
4. The company can face lawsuits in various markets given
5. Changes in regulations or user concerns regarding privacy and protection of
user data, or any failure to comply with such laws, could adversely affect
Yahoo’s business.

Social Trends and Demographic:

o OPPORTUNITIES
1. New customers from online channel
2. New trends in the consumer behavior can open up new market for the Yahoo
3. Internet sector is constantly changing
4. Internet advertising continues to grow, and consumers spend more and more
of their time online or using the internet
5. Yahoo! Inc. has 1.1 billion internet users around the world

o THREATS
1. Yahoo is poor in Research and Development which makes it hard
for them to find a way to go with the consistent change in
consumer preferences
2. Most of the internet people are millennials, Yahoo!’s poor ability in
observing the trends of today makes millennials divert to other
internet services

Technology:
o OPPORTUNITIES
 1. Stable free cash flow provides opportunities to invest in adjacent products
segments
2. The new technology provides an opportunity to Yahoo to practices
differentiated pricing strategy in the new market.
3. Movement into mobile technologies

o THREATS
1. New technologies developed by the competitor or market disruptor could be
a serious threat to the industry in medium to long term future
2. Shortage of skilled workforce in certain global market represents a threat to
steady growth of profits for Yahoo in those markets

Competition:
o OPPPORTUNITIES
1. The market development will lead to dilution of competitor’s advantage and
enable Yahoo to Increase its competitiveness compare to the other
competitors

o THREATS
1. Newly emerging competitive search engines and Social-networking sites are
working as advertisement markets which is stealing the share
2. Imitation of the counterfeit and low-quality product is also threat to Yahoo’s
product especially in the emerging markets and low-income markets
3. Intense competition from the industry
4. Google dominates the search engine industry with an iron fist with 92.04%
global market share
5. The number of competitors is increasing of new innovations in the internet
space by young entrepreneurs

Geography:
 o OPPORTUNITIES
1. The expansion of Yahoo! to different countries makes it gain more
customers
2. Some countries are stronger to spend more investment in advertising via
internet.

o THREATS
1. International, culture-specific competition
2. The third world countries have places where internet cannot be reached

IV. ALTERNATIVE COURSES OF ACTION

ACA#1: Figuring and evaluating the performance problems of Yahoo! Inc. so as
to understand what got the company to its current situation, and systematize the
management of the company, from top level management to low level
management.
Brainstorm, analyze, criticize, understand, and learn the company’s loop
holes. Develop a concrete mission, and vision statement of the company so there
will not be any confusion for the employees, and also the board of directors.
Develop a SMART objective for the company’s future. Develop a stronger
strategic plan with the assist of the SWOT and PEST analysis above. Invest more
in Research and Development, and technologies. Do not make the same mistake.
Implement the strategic plan, observe innovations, and do a corrective measure if
needed.

ACA#2: Hire a new CEO

Yahoo! has been criticized for failing to choose a person who fits as CEO of
Yahoo! Inc. the company should hire someone who has full knowledge and
understanding of the company’s failure and success, the market’s consistent change
in demands, the intense competition in the industry, the handling of a huge
company, the lacks and holes in the company, needs to innovation, and everything
in Yahoo! Inc. The company will have a new management along with the new
CEO. Arrange everything from top management to bottom management.

ACA#3: Place the Yahoo! Inc. out for bidding.

Since Yahoo! Inc. has been failing since early 200’s to several reasons that
was discussed above, make an offer to other successful, talented, and competitive
companies that can manage Yahoo! and can make it on top.

V. RECOMMENDATION
Based on the alternative courses of Action Presented, the table shows the results to
which alternative is being recommended. The alternative 1 is to be the best solution
since it has the highest number of totals in decision matrix. Also, alternative 1
meets the objective for the solution of the company’s problem.

Table 1.1 Decision Matrix (sample) Rating Scale 1-5 (lowest-highest)

CRITERIA ACA1 ACA2 ACA3

EFFECTIVENESS 4 3 2

ACCEPTABILITY 4 3 2

TIMELESS 5 4 2

RELEVANCE 4 4 2

ECONOMICAL 5 2 3
 TOTAL 22 16 11

VI. DEATILED PLAN FOR ACTION

ACTION - RESPONSIBILITY TIMETABL BUDGET
STEPS E
Brainstorm, Marketing Department 1 month ₱20,000 -
analyze, ₱40,000
criticize,
understand, and
learn the
company’s
loopholes with
the marketing
staff then
discuss it with
the board of
directors.
Develop a CEO and the Board of 1 month ₱20,000
concrete Directors
mission, and
vision statement
of the company
so there will not
be any
confusion for
the employees,
and also board
of directors
Develop a CEO and the Board of 1 month ₱10,000
SMART Directors
objective for the
company’s
future
Develop a Marketing Department 3 months ₱20,000 -
 stronger ₱40,000
strategic plan
with the assist of
the SWOT and
PEST analysis
above
Invest more in CEO, Finance Department, 6 months to 1 year ₱2,000,000 -
Research and Human Resource ₱6,000,000
Development, Department, and Board of
and Directors
technologies.
Hire Human Resource 6 months ₱50,000 -
knowledgeable Department ₱100,000
people for the
job
Implement the Operations Department, 6 months to 1 year ₱500,000
strategic plan and Marketing Department
Do a corrective Operations Department 6 months ₱1,000,000 -
measure if ₱2,000,000
needed