Harvard Case - Somedia: Diversification by Leveraging Resources and Capabilities
"Somedia: Diversification by Leveraging Resources and Capabilities" Harvard business case study is written by Niklaus Leemann, Dominik K. Kanbach. It deals with the challenges in the field of Strategy. The case study is 8 page(s) long and it was first published on : May 8, 2022
At Fern Fort University, we recommend that Somedia pursue a strategic diversification strategy focused on leveraging its core competencies in technology and analytics to enter the emerging markets of digital advertising and e-commerce. This strategy will involve a combination of organic growth through product development and market expansion, as well as inorganic growth through strategic acquisitions and joint ventures.
2. Background
Somedia is a successful media company with a strong presence in the traditional print and broadcast media markets. However, the company faces significant challenges from the ongoing digital transformation of the media industry. The case study highlights Somedia's need to diversify its business model to remain competitive and capitalize on new opportunities. The main protagonists are the CEO, who is seeking to guide the company through this transition, and the management team, who are tasked with developing and implementing the diversification strategy.
3. Analysis of the Case Study
SWOT Analysis:
- Strengths: Strong brand recognition, established distribution channels, experienced workforce, expertise in content creation, and a robust technology infrastructure.
- Weaknesses: Limited digital expertise, dependence on traditional media, slow to adapt to changing consumer behavior, and a lack of agility in responding to market trends.
- Opportunities: Growing digital advertising market, rise of e-commerce, increasing demand for personalized content, and the potential to leverage data analytics to improve customer engagement.
- Threats: Competition from established digital players, rapid technological advancements, changing consumer preferences, and potential regulatory changes.
Porter's Five Forces:
- Threat of new entrants: High due to the low barriers to entry in the digital advertising and e-commerce markets.
- Bargaining power of buyers: High due to the abundance of choices available to consumers.
- Bargaining power of suppliers: Moderate, as Somedia relies on various suppliers for technology, content, and advertising services.
- Threat of substitutes: High, as consumers can easily switch between different media platforms and online retailers.
- Competitive rivalry: Intense, with numerous established players and emerging startups vying for market share.
Value Chain Analysis:
Somedia's value chain can be strengthened by focusing on:
- Inbound logistics: Optimizing content sourcing and distribution processes to ensure timely and efficient delivery.
- Operations: Leveraging technology and analytics to improve content creation, personalization, and customer targeting.
- Outbound logistics: Expanding digital distribution channels and leveraging social media for marketing and customer engagement.
- Marketing and sales: Developing targeted digital advertising campaigns and leveraging data analytics to optimize customer acquisition and retention.
- Service: Providing personalized customer support and leveraging technology to enhance user experience.
Business Model Innovation:
Somedia can explore innovative business models like:
- Subscription-based services: Offering premium content and exclusive benefits to subscribers.
- Data-driven advertising: Leveraging user data to deliver highly targeted and personalized advertising campaigns.
- E-commerce platform: Integrating online shopping experiences with existing media content to create a seamless customer journey.
Competitive Advantage:
Somedia can achieve a sustainable competitive advantage by:
- Product differentiation: Creating high-quality, engaging content that resonates with specific target audiences.
- Cost leadership: Leveraging technology and automation to streamline operations and reduce costs.
- Focus strategy: Targeting niche markets with specialized content and services.
Globalization Strategies:
Somedia can leverage its existing resources to expand into emerging markets by:
- Market penetration: Adapting existing products and services to meet the specific needs of local consumers.
- Market development: Expanding into new geographic markets with high growth potential.
- Product development: Creating new products and services specifically tailored to emerging markets.
4. Recommendations
- Develop a Digital Advertising Platform: Invest in building a state-of-the-art digital advertising platform that leverages data analytics and AI to deliver targeted and personalized advertising campaigns.
- Enter the E-commerce Market: Launch an e-commerce platform that integrates with existing media content and offers a curated selection of products and services.
- Acquire or Partner with Digital Media Companies: Seek strategic acquisitions or partnerships with established digital media companies to gain access to new technologies, talent, and market share.
- Invest in Data Analytics and Technology: Enhance existing data analytics capabilities and invest in new technologies to optimize content creation, customer engagement, and advertising effectiveness.
- Develop a Global Expansion Strategy: Identify high-growth emerging markets and develop tailored strategies for market entry and expansion.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Somedia's strengths, weaknesses, opportunities, and threats, as well as the broader industry trends and competitive landscape. They align with Somedia's core competencies in technology and analytics, while also addressing the need to diversify its business model and capitalize on the growth potential of the digital advertising and e-commerce markets.
Quantitative Measures:
- NPV: The proposed investments in digital advertising and e-commerce platforms are expected to generate positive net present values, considering the potential for increased revenue and market share.
- ROI: The return on investment for these initiatives is expected to be significant, as they leverage Somedia's existing resources and expertise to enter high-growth markets.
Assumptions:
- The digital advertising and e-commerce markets will continue to grow at a rapid pace.
- Somedia can successfully develop and implement its digital transformation strategy.
- The company can attract and retain talent with the necessary digital skills and experience.
6. Conclusion
Somedia faces a critical juncture in its evolution. By embracing a strategic diversification strategy focused on digital advertising and e-commerce, the company can leverage its core competencies to capitalize on new opportunities and secure its long-term success in the rapidly changing media landscape.
7. Discussion
Alternatives:
- Focus on traditional media: This option would be risky, as it would leave Somedia vulnerable to the continued decline of traditional media.
- Sell the company: This option would be a short-term solution but would not address the long-term challenges facing the media industry.
Risks:
- Competition: Intense competition from established digital players and emerging startups could make it difficult to gain market share.
- Technological change: Rapid technological advancements could quickly render existing technologies obsolete.
- Consumer behavior: Changing consumer preferences could make it difficult to attract and retain customers.
Key Assumptions:
- The digital advertising and e-commerce markets will continue to grow at a rapid pace.
- Somedia can successfully develop and implement its digital transformation strategy.
- The company can attract and retain talent with the necessary digital skills and experience.
8. Next Steps
- Develop a detailed strategic plan: This plan should outline the specific goals, objectives, and timelines for each diversification initiative.
- Invest in technology and talent: Recruit and train employees with the necessary digital skills and experience.
- Develop a strong brand presence in the digital space: Build a strong online presence and leverage social media to engage with target audiences.
- Monitor and evaluate progress: Regularly track key performance indicators and make adjustments to the strategy as needed.
By taking these steps, Somedia can successfully navigate the digital transformation of the media industry and emerge as a leading player in the digital advertising and e-commerce markets.
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Case Description
In 2018, the legacy business of Somedia AG (Somedia)-traditional media such as newspapers, radio, and TV-was in structural decline. While its business portfolio still delivered positive financial results, it became clear that this would only be the case for a few more years. Susanne Lebrument and Thomas Kundert, the two main figures in charge as this pivotal moment in the firm's history emerged, tasked themselves with finding new business areas that would secure sustained profitable growth and, thus, compensate the declining legacy business. The firm had a rich history and was a well-respected institution in southeastern Switzerland; as such, Somedia's existing resources and capabilities would provide points of departure for new business development and diversification. Lebrument and Kundert's key strategic challenge was to change the current business trajectory toward sustained profitable growth that would compensate for the decline and eventual disappearance of Somedia's legacy business.
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