Yahoo is a leading global internet and digital media services company, among the first internet search businesses. The company was created by Jerry Yang and David Filo in 1994. It continues to grow and differentiate its portfolio of services. The search engine comes with electronic mail services, news portals, social media products, and finance engine and web directory. The social media segment entails content sharing, expert networks, and communications. The company operates on the vision of providing personalized digital experiences to its user base across regions, devices, and advertisers. The current leader is initiated appropriate strategies to pursue this vision (Rittenberg, Johnstone & Gramling, 2010).
Yahoo Company primary sources of income are the link of users and advertisers through the portfolio of products. Currently, Yahoo is among the first companies of the 500 companies in Fortune 500 holding position 483 (Angel, 2002). This paper will provide an overview of the company's history, current position, and offers future recommendations. The paper utilizes SWOT analysis and Michael Porter's five forces to diagnose the industry in which Yahoo operates to develop future strategies. The paper draws on and contributes to existing literature about the subject matter and other related topics.
Yahoo Company is an internet service provider serving both businesses and users across the globe. Established in 1994, the company started operating as a hobby before evolving into a multifaceted brand, which is currently serving internet users worldwide. Yahoo Company has developed into the largest global online network across the world in terms of integrated services.
Based on the company's website, it has become the leading search engine across the worldwide internet. Currently, it boasts of 600 million users all over the world visiting the site every month. Yahoo has established offices across Asia Pacific, Europe, Canada, U.S., and Latin America (Helder, 2011). Apparently, it has its headquarters in Sunnyvale, California. The Californian-based company was integrated in 1955. It was first launched in 1996. During its initial opening to the public, its shares traded at 413 per share. By the close of the IPO trading, its shares had bounced up to $33 per share (Hill & Jones, 2007). Currently, yahoo in 1999, Yahoo was incorporated as it entered into joint ventures. Through efforts of joint venture, Yahoo created new offices in Japan (Rittenberg, Johnstone & Gramling, 2010). The company's partnership with new ventures like SOFTBANK created new markets in United Kingdom, Germany, Korea, and France. These joint ventures have accelerated new markets in other areas including services and consumer markets. In addition, the partnerships have enabled Yahoo to penetrate markets such as Australia and New Zealand. The company offers its client base instant messaging, webmail, personals, and music and video services (Rittenberg, Johnstone & Gramling, 2010).
Yahoo has evolved into a portal company. The company learned that through being sticky, by developing a web presence, which prompted users to stay online; they could generate profits from the webpage. This led Yahoo to penetrate through the market. Besides generating satisfactory incomes, Yahoo has managed to let their search product to perform dismally. Google as Yahoo's chief rival is a mastermind of the art of monetization via contextual advertising (Angel, 2002). Contextual monetization is an approach where a small software code is inserted in WebPages to interpret the texts while advertising based on specific keywords. Most web advertisers are increasingly emulating Google's contextual advertising version to acquire monetization for their individual traffic. In this trend, Yahoo has adopted this strategy of contextual web advertising. So far, the approach has proven to be profitable, but the company is yet to refine it to make a great impact in the market.
SWOT is a strategic technique utilized in examining the weaknesses, strengths, opportunities, and threats within a business. A company will be able to formulate and adopt different strategies after conducting a SWOT analysis. Various organizations implement SWOT tactics by combining internal and external factor evaluation to help them exploit available opportunities up to a maximum while avoiding any possible threats.
The strengths of Yahoo Company include a solid brand image, which gives the business a competitive advantage over its rivals, innovative and talented research, and development crew behind the company's revolutionary items and strong financial performance giving investors the confidence of investing in the business. This implies that Yahoo does not lack capital for venturing in new areas that it wishes to pursue (Hill & Jones, 2007).
Yahoo has been recently entangled in various case battles that involve intellectual property rights. These could have an adverse impact on the company's performance. Additionally, Yahoo has been forced to recall some items because of the risk posed to customers. This has resulted in a negative company image. It partnership with some companies seems not to have paid off as was expected.
There is a massive potential in the internet and digital media service markets, which could increase Yahoo's revenue in the near future. In addition, there is a high potential of news portals, social media products, and finance engine, which could be exploited.
The increasing popularity of Google's search engine and digital media platforms are expected to affect Yahoo's sales revenues. Additionally, the company's sales volume could be affected by rivalry from other industry players while the reliance on minimal suppliers could pose as a challenge to the future of the company (Rittenberg, Johnstone & Gramling, 2010).
Porter's Five Forces Model
Michael Porter's five forces model is utilized when analyzing any industry. The five forces entail; the bargaining power of consumers, threat of new entrants, competitive rivalry, bargaining power of suppliers, and the threat of substitute products. Yahoo will definitely re-establish its market position by engaging the five forces model (Angel, 2002).
Threats of new entrants
In markets where it is easier for investors to investor in an industry, obviously, the threat of new entrants becomes high. Barriers in any industry will determine the magnitude that the threat of new players brings to the existing ones. The threat of new entrants in the internet and digital media services; electronic mail services, news portals, social media products, and finance engine and web directory is very high. Companies have to spend high amounts of money on marketing and R&D to generate new products in the market. Additionally, economies of scale have become a source of competitive advantage. Companies use them to acquire access and platforms for effective channels of distribution. Some new players in the industry contributing to Yahoo's decline in profitability include Lenovo and Bing (Rittenberg, Johnstone & Gramling, 2010).
Bargaining power of suppliers
In any industry, suppliers provide raw materials useful in the production of specific products. In any given sector, the power of suppliers is obviously established by the number of suppliers in the given sector. This implies that few suppliers mean a high supplier bargaining power. The threat of suppliers within the internet and digital media market is extremely high as there are few suppliers of digital operating systems and internet signaling chips. Studies indicate that Texas Instruments is the core supplier of internet signaling chips to numerous digital media and internet manufactures. The presence of few suppliers means that they could manipulate the market anyhow as they hold a high bargaining power (Rittenberg, Johnstone & Gramling, 2010).
Bargaining power of buyers
There is a wide range of purchasers of internet and digital media services, including electronic mail services, news portals, social media products, and finance engine and web directory services. This influences them to have a lot of power in the market. The beginning a brand loyalty is established when the first purchase is made. Yahoo store offers numerous platforms that cannot be transferred to other brands. This tends to be viewed as a high cost (Angel, 2002). While it might appear that consumers have an upper hand, their options are limited and temporary because products are purchased whilst contractually being bound to a network carrier or provider. Arguably, these results in a perfect situation whereby consumers are ascertain brand loyalty as they acquainted to their products. Consumers enjoy a high bargaining power even though it might be expensive as termination of a contract could lead to financial costs.
Threats of substitute products
A substitute is defined as a unique product that when contrasted to other products in the market, it could satisfy the needs met by other different items. Some substitutes to the internet and digital media services include smart phone industry and faxes. However, in this industry the threat of substitute products can be argued to be minimal as they cannot be used in times of urgency contrary to voice calls.
Competition among existing players in the industry
Competition among existing industry players tends to differ depending the industry. Competing companies tend to compete based on product differentiation, price wars, and product development. Low barriers of entry in a sector imply that few competitors exist in the diverse industries that Yahoo carries out its business. This results in intense rivalry as firms strive…