Harvard Case - British Satellite Broadcasting versus Sky Television
"British Satellite Broadcasting versus Sky Television" Harvard business case study is written by Pankaj Ghemawat. It deals with the challenges in the field of Strategy. The case study is 18 page(s) long and it was first published on : Sep 1, 1993
At Fern Fort University, we recommend that British Satellite Broadcasting (BSB) pursue a strategic alliance with Sky Television to create a joint venture in the UK satellite television market. This alliance would leverage the strengths of both companies, enabling them to achieve sustainable competitive advantage in the face of emerging challenges and capitalize on the growing demand for satellite television.
2. Background
The case study focuses on the intense rivalry between British Satellite Broadcasting (BSB) and Sky Television in the UK satellite television market during the late 1980s and early 1990s. BSB, backed by the BBC and a consortium of companies, launched its service in 1989 with a disruptive innovation ' high-definition television (HDTV). Sky Television, backed by Rupert Murdoch's News Corporation, launched its service in 1989 with a focus on cost leadership and a wider range of channels.
The main protagonists are:
- Robert Maxwell, Chairman of BSB, a visionary entrepreneur with a strong belief in the potential of HDTV.
- Rupert Murdoch, Chairman of News Corporation and Sky Television, a media mogul known for his aggressive business strategies.
3. Analysis of the Case Study
Porter's Five Forces Analysis:
- Threat of new entrants: High, due to the relatively low barriers to entry in the satellite television market.
- Bargaining power of buyers: Moderate, as consumers have a choice between BSB and Sky Television.
- Bargaining power of suppliers: Low, as the suppliers of satellite technology are numerous and competitive.
- Threat of substitute products: High, with cable television and terrestrial television offering alternative forms of entertainment.
- Rivalry among existing competitors: Intense, with both BSB and Sky Television vying for market share and customer loyalty.
SWOT Analysis:
BSB:
- Strengths: Strong brand recognition, innovative HDTV technology, diverse programming.
- Weaknesses: High operating costs, limited channel selection, complex technology.
- Opportunities: Growing demand for satellite television, potential for international expansion.
- Threats: Competition from Sky Television, technological obsolescence of HDTV.
Sky Television:
- Strengths: Lower operating costs, wider channel selection, strong management team.
- Weaknesses: Limited innovation, potential for regulatory scrutiny.
- Opportunities: Growing demand for satellite television, potential for international expansion.
- Threats: Competition from BSB, technological obsolescence of standard definition television.
Value Chain Analysis:
Both BSB and Sky Television operate within a similar value chain, including:
- Research and Development: Developing new technologies and programming.
- Production: Acquiring and producing content.
- Distribution: Broadcasting signals via satellite.
- Marketing and Sales: Promoting services to consumers.
- Customer Service: Providing support to subscribers.
Business Model Innovation:
BSB's business model was based on disruptive innovation, offering a premium product with HDTV technology. Sky Television adopted a cost leadership strategy, offering a wider selection of channels at a lower price.
Strategic Planning:
Both companies pursued aggressive strategic planning to gain market share and establish a dominant position. However, BSB's focus on HDTV proved to be a strategic misstep, while Sky Television's focus on cost leadership and market penetration proved more successful.
4. Recommendations
BSB should pursue a strategic alliance with Sky Television to create a joint venture in the UK satellite television market. This alliance should be structured as follows:
- Joint Management: A joint management team should be established, combining the strengths of both companies.
- Shared Infrastructure: The companies should share their infrastructure, including satellites, broadcasting facilities, and customer service operations.
- Combined Programming: The companies should offer a combined programming package, including both HDTV and standard definition channels.
- Joint Marketing and Sales: The companies should collaborate on marketing and sales efforts, leveraging their combined brand recognition and reach.
5. Basis of Recommendations
This recommendation is based on the following considerations:
- Core competencies and consistency with mission: The alliance would leverage the core competencies of both companies, combining BSB's innovative technology with Sky Television's operational efficiency.
- External customers and internal clients: The alliance would offer customers a wider selection of channels and a more competitive price point, while providing employees with greater opportunities for career growth.
- Competitors: The alliance would create a stronger competitor to other satellite television providers, such as cable television and terrestrial television.
- Attractiveness - quantitative measures: The alliance would generate significant cost savings through shared infrastructure and joint marketing efforts, leading to increased profitability and market share.
6. Conclusion
The British Satellite Broadcasting versus Sky Television case study highlights the importance of strategic planning, market analysis, and competitive advantage in the dynamic media industry. By embracing a strategic alliance with Sky Television, BSB can overcome its challenges and achieve long-term success in the UK satellite television market.
7. Discussion
Other alternatives not selected include:
- Acquisition: BSB could attempt to acquire Sky Television, but this would be a costly and complex undertaking.
- Merger: BSB and Sky Television could merge into a single entity, but this would require significant regulatory approval and could lead to antitrust concerns.
- Independent competition: BSB could continue to compete independently with Sky Television, but this would likely result in a protracted and costly battle for market share.
The key assumptions of our recommendation are:
- Regulatory approval: The joint venture would need to be approved by the UK government and regulatory bodies.
- Cultural compatibility: The companies would need to overcome any cultural differences and integrate their respective workforces.
- Market demand: The demand for satellite television would need to continue to grow to support the joint venture.
8. Next Steps
The following steps should be taken to implement the recommended alliance:
- Negotiate a Joint Venture Agreement: The companies should negotiate a comprehensive agreement outlining the terms of the alliance, including ownership structure, management responsibilities, and financial arrangements.
- Integrate Operations: The companies should integrate their operations, including their infrastructure, programming, and customer service.
- Launch Joint Marketing Campaign: The companies should launch a joint marketing campaign to promote the combined offering to consumers.
- Monitor Performance: The companies should continuously monitor the performance of the joint venture and make adjustments as needed.
This strategic alliance would enable BSB and Sky Television to achieve sustainable competitive advantage in the UK satellite television market, creating a stronger competitor and delivering value to customers.
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Case Description
Describes the rivalry between two competitors who have attempted to become the dominant force in the emerging British satellite television industry. Can be used to examine issues of competitive positioning, technology adoption, and scenario analysis. Helps students make decisions given competitive challenges and industry uncertainties.
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