Harvard Case - Hostile Takeover Battle in Japan: Fuji TV vs. Livedoor for NBS
"Hostile Takeover Battle in Japan: Fuji TV vs. Livedoor for NBS" Harvard business case study is written by Mitsuru Misawa. It deals with the challenges in the field of Strategy. The case study is 30 page(s) long and it was first published on : May 10, 2006
This case study analysis recommends that Fuji Television Network, Inc. (Fuji TV) should vigorously defend its position against Livedoor's hostile takeover bid for Nippon Broadcasting System, Inc. (NBS). This defense should be multifaceted, focusing on building shareholder value, leveraging strategic alliances, and highlighting the potential risks of Livedoor's acquisition.
2. Background
This case study revolves around the hostile takeover bid launched by Livedoor, a rapidly growing internet company, for NBS, a major Japanese broadcasting company. Fuji TV, a major stakeholder in NBS, sought to prevent the takeover, citing concerns about Livedoor's business model and its potential impact on NBS's broadcasting operations. The case highlights the clash between traditional media companies and the emerging power of internet-based businesses in Japan.
The main protagonists are:
- Livedoor: An internet company founded by Takafumi Horie, known for its aggressive growth strategy and unconventional business model.
- NBS: A major Japanese broadcasting company with a long history and a strong position in the market.
- Fuji TV: A major stakeholder in NBS, seeking to maintain its influence and protect its investment.
3. Analysis of the Case Study
This case study can be analyzed using a combination of frameworks, including:
a) Porter's Five Forces: This framework helps understand the competitive landscape of the broadcasting industry in Japan. The analysis reveals:
- High threat of new entrants: The internet's rise presented a significant threat to traditional media companies, as evidenced by Livedoor's emergence.
- High bargaining power of buyers: Consumers have a wide range of media choices, limiting the pricing power of broadcasters.
- Moderate rivalry among existing firms: Competition among broadcasters is intense, driven by audience share and advertising revenue.
- Low bargaining power of suppliers: Broadcasters rely on a variety of content providers, giving them some bargaining power.
- High threat of substitute products: The internet offers numerous alternatives to traditional broadcasting, including online streaming and social media.
b) SWOT Analysis: This framework helps assess the strengths, weaknesses, opportunities, and threats of each company:
Livedoor:
- Strengths: Strong brand recognition, innovative business model, rapid growth, strong online presence.
- Weaknesses: Lack of experience in broadcasting, potential financial instability, reliance on internet advertising.
- Opportunities: Expanding into new media markets, leveraging technology and analytics, acquiring valuable assets.
- Threats: Regulatory scrutiny, competition from established media players, potential loss of investor confidence.
Fuji TV:
- Strengths: Established brand, strong broadcasting infrastructure, loyal audience, financial stability.
- Weaknesses: Resistance to change, potential lack of digital expertise, limited online presence.
- Opportunities: Investing in digital platforms, expanding into new media markets, leveraging strategic alliances.
- Threats: Competition from internet companies, declining viewership, potential loss of market share.
c) Value Chain Analysis: This framework helps understand the key activities of each company and their competitive advantage:
- Livedoor: Livedoor's value chain is built around its online platform, leveraging technology and analytics to attract users and generate revenue through advertising and other services.
- Fuji TV: Fuji TV's value chain is centered around its broadcasting infrastructure, content creation, and distribution. Its competitive advantage lies in its established brand, loyal audience, and strong relationships with content providers.
d) Business Model Innovation: Livedoor's emergence represents a significant business model innovation, challenging the traditional broadcasting model. Its reliance on the internet, its aggressive growth strategy, and its focus on online advertising present a new paradigm for media companies.
e) Corporate Governance: The case highlights the importance of corporate governance in protecting shareholder interests. Fuji TV's efforts to defend NBS against Livedoor's bid demonstrate the role of corporate governance in safeguarding the interests of stakeholders.
4. Recommendations
Fuji TV should implement a multi-pronged strategy to defend its position against Livedoor's takeover bid:
a) Build Shareholder Value:
- Increase dividends: Demonstrating commitment to shareholder returns can attract investors and deter Livedoor's bid.
- Implement a share buyback program: This can increase share price and make the company less attractive to a hostile takeover.
- Focus on operational efficiency: Improving profitability and financial performance can strengthen Fuji TV's position.
b) Leverage Strategic Alliances:
- Partner with other media companies: Forming alliances can create a stronger front against Livedoor and provide access to new resources and expertise.
- Seek support from government agencies: Engaging with regulatory bodies can highlight the potential risks of Livedoor's acquisition and gain support for Fuji TV's position.
c) Highlight the Risks of Livedoor's Acquisition:
- Emphasize Livedoor's lack of experience in broadcasting: This can raise concerns about the potential disruption to NBS's operations.
- Point out the potential financial instability of Livedoor: This can raise concerns about the long-term viability of the acquisition.
- Highlight the potential impact on NBS's content and programming: This can raise concerns about the quality and integrity of NBS's broadcasting.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Fuji TV's core competencies lie in its broadcasting expertise and its commitment to quality content. These recommendations align with its mission to provide high-quality programming and maintain its position as a leading broadcaster.
- External customers and internal clients: These recommendations aim to protect the interests of both external customers (viewers) and internal clients (employees). By maintaining NBS's independence and integrity, Fuji TV can ensure the continued quality of its programming and the stability of its workforce.
- Competitors: These recommendations aim to counter the threat posed by Livedoor and other internet companies. By building shareholder value, leveraging strategic alliances, and highlighting the risks of Livedoor's acquisition, Fuji TV can strengthen its competitive position.
- Attractiveness ' quantitative measures: These recommendations are expected to increase shareholder value and enhance Fuji TV's financial performance.
6. Conclusion
Fuji TV's defense against Livedoor's hostile takeover bid is crucial for its long-term success. By implementing a multi-pronged strategy that focuses on building shareholder value, leveraging strategic alliances, and highlighting the potential risks of Livedoor's acquisition, Fuji TV can effectively defend its position and ensure the continued success of NBS.
7. Discussion
Other alternatives not selected include:
- Accepting Livedoor's bid: This would have resulted in the loss of control over NBS and potentially disrupted its operations.
- Merging with another media company: This could have provided a stronger defense against Livedoor, but it would have required significant restructuring and potential cultural clashes.
Key assumptions include:
- Livedoor's financial stability: This is a key assumption, as any financial instability could threaten the acquisition and potentially harm NBS.
- Regulatory scrutiny: The regulatory environment in Japan could play a significant role in the outcome of the takeover battle.
- Public opinion: Public opinion towards Livedoor and its business practices could influence the outcome of the acquisition.
8. Next Steps
Fuji TV should implement its defense strategy immediately, focusing on the following key milestones:
- Within one month: Implement a share buyback program and increase dividends.
- Within three months: Initiate discussions with potential strategic partners and engage with government agencies.
- Within six months: Publicly highlight the risks of Livedoor's acquisition and communicate its strategy to shareholders.
By taking these steps, Fuji TV can effectively defend its position and ensure the continued success of NBS in the evolving media landscape.
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Case Description
In February 2005, the top management of Fuji Television Network, Inc., one of Japan's leading media conglomerates, was informed that a small IT-related company, Livedoor Co., had bought 35% of shares in Nippon Broadcasting System, Inc. (NBS) with the help of Lehman Brothers, a U.S.-based financial services firm. Fuji TV owned 12.39% of NBS shares and was in the process of acquiring it. What complicated the issue was that NBS' main asset was its 22.5% stake in Fuji TV. The news came as a shock because Livedoor had acquired NBS shares through off-floor trading at the Tokyo Stock Exchange--prohibited by the Securities Exchange Law, unless done for the purposes of a takeover bid. Fuji TV's top management had to take effective measures to counter Livedoor's move. Such measures involved the assistance of legal counselors and the planning department, who studied which legal and effective actions Fuji TV could take against Livedoor and calculated the corporate value of NBS using both American and Japanese methods.
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