Case study analysis and methodology

¶ … Fashion Channel was established in mid 1990s and its success was immediate. It addressed mostly women interested in fashion topics and had the competitive edge of offering unique selections of programs. In time however, other players within the entertainment industry have recognized the ability of fashion TV to make money and they begun to offer the respective services, significantly increasing competition in the field. Today, The Fashion Channel remains one of the preferred stations of fashion passionate viewers, with above the average ratings, but a reputation and performance that are overshadowed by competition. Given this status quo then, the managerial team has reluctantly decided to implement the process of organizational change. Despite their reticence with fixing something that is not broken, survival in the industry reveals the impending need for change and improvement, meaning that the organization cannot pass the change process. The most relevant features of the Fashion Channel are put in perspective by the following SWOT analysis:

Internal Strengths

Long lasting history and a strong reputation within both entertainment as well as fashion industries

Strong financial highlights that follow an ascendant trajectory since its foundation in 1996

Highly successful in addressing a pretentious niche market

Revenues are generated from both direct operations in fashion entertainment television, as well as cable-affiliate fees

Internal Weaknesses

The fact that it addressed a specific niche market means that the cable TV's ability to increase its customers palette is fairly reduced

Marketing efforts to attract more viewers have been scarce

Additionally, overall marketing endeavors were reduced (brand, positioning, segmentation etc.)

Just like in any other organization, the levels of resistance to change are fairly increased; this is however justified with TFC as, at this stage, nothing is in fact in a situation that would require 'fixing'

There is the possibility of having to decreased advertising rates, which will translate into lower revenues

External Opportunities

The organization hired marketing specialists to guide it through the process of change and improvement

Development of numerous modern marketing tools that stand increased chances of reaching and attracting larger numbers of viewers

External Threats

The success of The Fashion Channel inspired other entrepreneurs in the entertainment industry to offer similar programs (i.e. Lifetime and CNN), meaning as such that competition in the field significantly increased

There is a risk that the $60 million investment will not generate the expected return

2.

The information reviewed by Dana Wheeler was complex and revealed various trends and situation within the market, addressing issues of both consumer demand trends, as well as competitive efforts to increase the client share. The senior vice president of the Fashion Channel's marketing department must take into consideration all of the information available to her, but intense focus must be placed on some specific data. For once, it must be recognized that the company is currently addressing a niche market. The advantage of the situation is that, through its program format and content, TFC is highly able to satisfy this specific target market. Yet, the disadvantage relies in that the opportunities to address wider and more complex target markets are reduced. This basically translates into a reduced ability to diversify the service offering and generate more revenues. While in the short run, the most crucial threat is that of stagnation, in the long run however, the failure to diversify and attract larger numbers of viewers will most definitely result in organizational collapse.

Another pivotal piece of the puzzle refers to the fact that the current state of events might, in the near future, materialize in a necessity to reduce the rates perceived for advertisements. This will implicitly mean that the revenues are decreased. Once profits are lowered, the investment, improvement and competitive capabilities will also suffer demises. Similar to the previous case, a resolution could only be possible through the attraction of more viewers. "Wheeler knew that in order to hold or increase price it would be crucial to attract a critical mass of viewers who were interested in the network's content and were also attractive to advertisers" (Stahl, 2007).

3.

In order to achieve the established desiderates of increasing the popularity and competitiveness of The Fashion Channel by making it more appealing to wider customer palettes, the senior vice president of marketing has identified three possible scenarios. The first sees a segmentation of the customer-based with the aid of traditional techniques. The second focuses on Fashionistas (smallest in size but the most intensive), whilst the third possibility sees a combination of two categories -- Fashionistas and shoppers / planners. Each of these scenarios reveals both advantages as well as disadvantages. In this order of ideas, the broad-based segmentation has the primary benefit of promising 20% increases in ratings (from 1 to 1.2) as awareness and popularity of the television channel would continually increase through the development and implementation of marketing, advertising and programming strategies. On the other hand, the limitations rely in that the endeavor has limited to none abilities to protect the organization against the threats of intensified competition. Additionally, it is possible that the CPM will register a 10% decrease, which is more than the expected growth in ratings can cover.

The second possible alternative sees the focus on Fashionistas and has the primary advantage of addressing an intense and highly responsive segment. "It was smaller than the other segments, representing only 15% of households, and so targeting them might lead to a drop in viewers -- but it would also strengthen the value of the audience to advertisers, with a likely increase in CPM. Wheeler estimated that this strategy could deliver a rating of 0.8" (Stahl, 2007). Finally, the combined approach of Fashionistas and planners / shoppers is based on the financial theory of portfolio diversification. Otherwise put, by addressing a combined target market, the company will be able to maximize gains and minimize risks. More specifically, Wheeler believed that the combined approach would stand the possibility of increasing ratings to 1.2, while a simultaneous increase of $2.50 would be registered for CPM. The disadvantage relies however in the significantly higher costs of this approach as it would require an additional $20 million.