You have been hired as the consultant. Your job is to put together a consulting
ID: 367522 • Letter: Y
Question
You have been hired as the consultant. Your job is to put together a consulting report of 10-15 pages (typed single spaced with 12 point font). The report’s goal is to offer the management of The Chronicle Gazette a strategic vision of where the newspaper publishing industry stands today and where it is headed over the next decade. You also need to propose strategies the newspaper can investigate to survive in the new business environment. Structure your presentation so that it can be used by Susan’s team as a roadmap to putting together a detailed strategic plan.
Explanation / Answer
1.0 Introductions
The Chronicle Gazette is the leading newspaper industry in the United States with a circulation of 225,000 customers. Over the past few decades, this company has been facing a dramatic decline in its customer base and revenues. This reduction in the customer base is mainly due to the increasing dominance of the Internet use as the easiest means of disseminating information and news across the globe. The newspaper publishing industry in the United States is going through a difficult phase of declining revenues. In this case, both subscription and advertising revenues have been steadily declining. One of the main that has contributed to this downfall is that many people are using the Internet to get news content for free and are also reluctant to pay for those services.
Currently, The Chronicles Gazette is also facing different challenges within its macro and micro-environments which affect the industry's competitive advantage just like other newspaper companies in the world . This include the changes as a result of technological improvement, which greatly influence the social behaviour and functions of the people, particularly those that are related to following news and information about local and international scenarios.
Therefore, the main purpose of this report is to expose various measures that The Chronicle Gazette should take in order to boost its newspaper circulation and increase their profits. The report will analyze the newspaper industry in the United States by providing details of its present status and future position.This report will offer the management of the company a strategic vision of that describes where the newspaper publishing industry stands today and where it is headed over the next decade. Furthermore, this report will also present different strategies that the company can use to investigate in order to survive in the new business environment.
2.0 State of the Newspaper Publishing Industry Today
2.1 Data on Declining Circulation and Revenue
The newspaper industry has been known as dying industry for a long time. In the past decades, different articles have been written which dictates the death of these industries. This include the columnist Eric Zorn of Chicago Tribune that tackled 10 speeches, blogs, magazine articles, newspapers and reports that focuses on the demise of the industry. In addition, one of the posted articles of Washington Post in 2005 indicated that: “The venerable newspaper is in trouble. Under sustained assaults from cable television, the Internet, radio, and lifestyles that are cram-packed leave very little time for the daily paper, thus the industry is struggling to remake itself”
In 2009, the Newspaper Association of America reported that the total advertising revenue collected from newspapers was $27.564 billion: $24.821 from print revenue, and $2.743 billion from online advertising. These figures indicate a total of 27.2% which is a fall from $37.848 billion from the last year. In 2008, the Audit Bureau of Circulations (ABC) reported that the newspaper circulation had dropped by 10.6%.
As a result of these, most newspaper companies have started to shutter their print editions and lay off their employees, while some other industries are closing down due to the huge contradiction between the economic recession and competitions posed by the internet.
2.2 Status of Newspaper Leaders
The top 25 newspapers in the US showed a decline in their circulation. In 2009, ABC reported that the weekly circulation of San Francisco Chronicles had drastically dropped by almost 23% from the previous year's figure. The Washington Post, dropped from 4,415,893 to 578,482 (a decrease of 13.1%) and from 9,727,793 to 797,679 ( a decrease of about 8.2%) on Sundays; USA Today also decreased by 13.6%, and this decline enabled The Wall Street Journal to gain the first spot of being biggest circulation in the US. Even though the journal reported growth of its circulation by 0.5% to 2.09 million, the company still experienced some slight decline in circulation if the printed newspaper that will be counted. The payment of online circulation of the company improved from 31,999 to 414,025. This number enabled the industry to offset the decline of more or less 20,000 on the print side. Therefore, the New York Times declared a decline of about 8.5% (951,063) in weekday circulations and 5.2% to 1.38 million on Sundays.
3.0 Why Newspapers are Facing Declining Circulations and Revenues?
The newspaper industry is facing some declining revenues and circulations from various factors such as the external environment, economic conditions of the state, social, political, and technological improvement. These factors are also linked with the external factors and capabilities of the company/organization.
3.1 External Assessment
3.1.1 Economic Forces
The US newspaper industry has been suffering since the great economic depression, thus, in the current global financial crisis, this resulted to the decline of the advertising revenues. (Kirchhoff 2009). According to Devenson 2009, newspapers get their income from two sources which include; readers for subscriptions and newsstands and the advertisers. These two clients have been affected by the economic downturn in terms of providing subscriptions and proper methods of advertising those newspapers. In order for the newspaper companies to sustain their operations, a strategy for price increase was implemented. This made The Chicago Tribune to increased its non-Sunday single copy-price by 33% to $1 on the heels of price increase for home-delivery, while the Chicago Sun-Times increased was increased from 50 cents to 75 cents in 2009. As a result, the subscription, circulation, and revenue declined. Because the newspaper companies failed to obtain and maintain their market expectations for a long time, most investors, project capitalist, and the possible buyers became scared of this situation. At the end, drastic changes that were experienced in the economic situation forced these companies to reduce the amount that they were able or willing to pay for marketing activities.
3.1.2 Social, Cultural, Demographics and Environmental Forces
The social factor is the most important factors to be considered as an aspect of change in the newspaper industry. This is because it has affected the overall lifestyle and behaviour of many individuals, and particularly the newspaper readers of. In addition to this, invention of the Internet, technology, and the influence brought about by globalization, has helped many individuals to acquire an easy access to a high-speed Internet connections by use of their smart phones and other related gadgets thus altering how these people access their news. The ironic thing is that news and current events are still in huge demand, however, the Web enables its customers to access information freely and easier and at the same time, there are also some websites and places which enables promoters and other business people to market their products in a cheaper and an efficient manner. Furthermore, the study of Barnhurst & Wartella (2000) of 164 young adults about their subjective experience from the newspapers showed that even though they considered newspapers as a source of obtaining some factual information for the citizens, they perceived it as ritual, a symbol or tool, boring, and unrelated to their lives. Therefore, the Internet enables this group of people to access and retrieve information that will probably catch their main interest from different parts of the country which also forms part of the global culture. Environment is the last factor that pertains on the resources, processes and chemicals that are used in order to produce paper and inks which might pose some great harm to the environment.
3.1.3 Political, Governmental and Legal Forces
Due to the decline state experienced by these industries, many companies are implementing different cost-cutting and possible methods of closure in order to save their companies. Thus, it is said that these processes can affect the value of journalism and democracy in the affected country. Furthermore, there are also commentators who discussed that newspapers are organized for profit trusts, that are backed by rich patrons and relies on sales and advertising for revenue. Therefore, the freedom of speech and other rights related to the media, will have an impact by increasing the number of competitors, which will later enable the industry to undervalue the national newspaper development.
3.1.4 Technological Forces
The overall performance of the newspaper industry have been affected by the development of technology particularly in radio, television cable, and the Internet. This is because it has influenced and changed the behaviour of its customers, readers, and the advertisers who are the chief sources of revenue for the industry. Primarily, the radio and television have enabled readers to have substitute medium of accessing their news. However, internet forms the most important factor, which enables people to access and retrieve information about anything easily and cost less or even in a free manner. The research carried out by Nielsen shows that 62% of adult ignore newspaper websites thus, these websites caters for 1 minute/person/day. In addition to this, most of the web user spends about 30 to 40 hours a month online or 17% of their time in different online social networking sites such as facebook. This has reflected the actions of the advertisers shifting to online advertising because the Internet is seen to offer lower cost and at the same time, enables them to reach wider market.
3.1.5 Competitive Forces
Many new and upcoming firms will decide to enter the newspaper industry if the current firms are earning a lot of profits. Economic profits exist when the returns of an industry are superior than profits that are accessible from the substitute investments. Thus, the current firms will decide to leave the industry if the prices are high enough in order to handle their cost. Entry in the industry is complicated because of the advantages that are being enjoyed by the current firms such as lower production costs that are not available to these, the new firms. Therefore, it is important to consider the average cost of production of additional newspaper copies decreases as the number of copies printed increase in the long-run, thus the economies of scale in this case means a daily subscription prices that reaches some minority groups of the newspaper buyers. Another barrier to entry in the industry is the cost of starting a newspaper industry. It shows that costs for the daily newspapers with an estimated start-up costs of television and radio station and particularly websites. Furthermore, new entrants in the industry will face higher operating cost due to an incurred extra costs such as promotion cost. Therefore, many markets of the industry are facing some stiff competition from different newspapers layers including the national and suburban dailies and weeklies.
3.1.6 External Factor Evaluation (EFE) Matrix
According to David 2006, the external Factor Evaluation (EFE) Matrix helps strategists to summarise and assess the economic, socio-cultural, environmental, demographic, political, legal, technological, and competitive information The table designed below shows the EFE Matrix of The Chronicles Gazette.
Key External Factors Weight Rating Weighted score
Opportunities
Internet 10% 2 0.2
Advancement of Mobile gadgets: cellphones, 15% 1 0.0225
iPhones, smartphones etc.
Local news coverage 5% 3 0.15
Support from the government 5% 3 0.15
Threats
Economic downturn 15% 2 0.3
Growing competition with the online
advertisers 15% 1 0.0225
Lack of interest of the public to newspaper 10% 1 0.1
Internet 10% 2 0.2
People who are willing to pay for newspaper
subscription is declining 5% 1 0.0025
Indirect competition from different layers 10% 2 0.2
of Newspaper
Total 100% 1.3475
The total result obtained from the EFE Matrix shows that the overall effort and performance of the newspaper company in handling different opportunities and threats in the macro-environment is poor. therefore, using this matrix is important as it helps to focus on different micro-environmental factors or internal aspects that are related with how to improve its current performance and achieve competitive advantage.
4.0 Internal Assessment
4.1 Organizational Processes and Structure
In The Chronicles Gazette, the process of innovation or the product to be developed is only comprehensive to one person (Susan Feinman). This is because she is likely to have all of the required knowledge that is important to be developed and enhanced. Thus, it is structured as a functional organization (NPD n.d.). With this, all the available knowledge and respects regarding given activities are grouped together which enable easy offering of a valuable in-depth knowledge for the organization. The main disadvantage of this is that people are commonly concerned with their personal department’s success, and this may cause serious conflicts between departments, which will pre-empty the process of innovation and the achievement of goals and objectives.
4.2 HR Capabilities
The Chronicle Gazette is a leading newspaper in major metropolitan area. Thus, the newspaper has always been considered as a first-rate newspaper. With this level of consideration, the HR capabilities of the company are very high, particularly those regarding skills and knowledge of the writers in the organization. As an evidence, the company is receiving many awards for its articles.
4.3 Financial Position
Financially, this industry is capable because it is considered as a leading newspaper within its area because it has an approximately 225,000 customers. Therefore, from this figure, the company has been able to take advantage of high revenue and return of its profits. However, this position is exposed to risk due to different changes and development that are being experienced in both levels of the macro- and micro-environment. This pertains on the different factors that leads to changes in preferences and behaviour of the people towards newspapers, and at the same time, affect the promotional and advertising relationship of its advertisers towards the newspaper.
4.4 Marketing/Sales Capabilities
For many years, The Gazette Chronicle had been able to show and practice its expertise in communicating and connecting with its possible and reliable customers. With this, it can be deduced said that the newspaper is capable in carrying out its operations. As a result, the company has also enabled easy creation of a strong bond and relationship with its advertisers, which is also counted as a common source of revenue in the company. However, it is also important to consider the print media as being different from that of online media. This is because of the fact that there exist different forms of direct and indirect competitors who can affect the whole/entire process of achieving objectives and goals.
4.5 Operational Capabilities
Years of experience in print media enables the newspaper company to be familiar and skilled regarding the different processes, procedures and aspects that are included in the entire supply and value chain of the industry. With this, the company had been able to achieve its network or connections with the different important stakeholders. These stakeholders are vital factors which affect how the product or the outcome can be achieved, from the process of planning and writing the content or articles and accepting advertisement up to the process of disseminating the newspapers. However, this can be changed due to the decision of going online.
4.6 Strengths and Weaknesses as a Publisher
The ability to easy connection with its customers forms the basic primary strength of the newspaper industry. This is achieved easily because of intensive marketing process and the quality of articles or products that they are being offered to the market places. This pertains on the capability and qualifications of its writers and editors, together with other staff members that are related in creating the whole newspaper up to the printing process. However, the company is lacking behind in terms of innovation and strategies which can help them cater for the changing demands, references and perceptions of the market. This include the process of using technological resources, particularly the advent of the Internet and mobile devices.
5.0 How Companies in the Publishing Industry are adjusting their Strategies to cope with the Challenges
Due to the changes in the current macro- and micro-environment of the newspaper industry, many of the big names are focusing on implementing different strategies in order to maintain its competitive advantage, which will help them to maintain their position in the market, in terms of sales or revenue and the circulation in spite of the declining newspaper industry (Dahir 2009).
Newspaper industry can still maintain its printed circulation. This can be done by taking advantage of the existence of the suppliers to the industry. Outsourcing will be helpful by hiring services that are related with the non-core competencies, which include the printing of the paper and IT. This can give the suppliers the opportunities to improve their performance and be included in the industry in more stable manner. It is also important to consider that the newspaper is competing with other important media which can offer more entertaining, real-time and more eye/ear-catching than the newspapers, such as radio, television, magazine and the Internet. With this, it is important to upgrade the current materials that are used in order to print newspapers, including the quality of paper and the quality of ink to be used in order to produced newspaper (What They Think? 2009).
One of the primary strategies being implemented by the industry is to give away the content without the paper. Talking about theory, those readers who stop paying for the physical paper but still continue to read the content online is giving the publisher the favour. This is because, publishers will no longer have to include the process of printing which can cause time and cost in the entire supply chain of the company (Dahir 2009). This enables newspaper companies to take advantage of the Internet as a medium or mean of communicating with the viewers or readers. As have mentioned in the first part of the paper, the Internet had caused the decrease on the number of the readers and followers of newspaper because the Internet enables them to access news and other important information in easy and free manner. With such, many newspaper companies also jumped to the bandwagon of the Internet, which enables them to create a new way of generating revenue: online advertising. In connection, some are also implementing the micropayment system. This process extracts as much as $2 a month from the readers. With this, it helps to sustain revenue for the industry online (Dahir 2009). With this, it can help in order to overcome the changes in the cultural, demographic and economic factors which affect the performance of the industry. Particularly, the Internet is considered as the place where people from different age group, culture and backgrounds gather together in order to gather and search information. At the same time, it can also help in order to support the economic downturn which can affect the spending or purchasing behaviour of the people. Above all, it can also help in order to help the environment by decreasing or lessening the number of trees and other natural resources, together with the different chemicals that are used to produce the ink that might harm the environment and the health of the people.
In terms of technology, many of newspapers are also offering services and products via the new generation of gadgets particularly smart phones, mobile phones, iPhones and other gadgets which enable the reader to connect to the Internet and access newspaper clips and articles anywhere (Dahir 2009). This enables the industry to meet the changing social and demographic aspect of the public, which is to access information in handy and efficient manner. With this, it can help the company to cater to more number of people, with different technological demands and needs.
Primarily, by regaining and maintaining the consumer-base of the newspaper, companies will be able to regain the trust and the interest of the advertisers. Thus, because online or Internet enables them to publish or disseminate publishing and articles in easier and cheaper manner, newspaper companies will be able to compete with other online resource. At the same time, because, newspaper is no longer limited with printed materials or no longer paper-base, it can cater to and focus on more broader or wider readers or market, which is important factors for the advertisers. With these strategies and initiatives, newspaper will be able to prevent the extinction of the industry.
6.0 Steps The Chronicle Gazette might take in order to Deal with the Challenges
Based on the factors in the internal and external environment of The Chronicle Gazette, and the current strategic changes in many organizations in the industry, it is important for the company to focus on the different short-term and long-term steps.
6.1 Short-term Steps
The primary steps to be done are to research on the needs, demands of and the accessibility and availability of technology to the current and possible market. This involves investigation and assessment on how the community use and perceive the technology. This includes the gadgets and Internet connections that are used by the majority. With this, the company will be able to have background knowledge regarding the framework and means which can be used in the future or for long-term steps.
It is also important to develop, launch and maintain company website, which will help in order to create online presence, which can serve as initial steps of offering online services and products towards the current and possible customers. This can also help in order to promote and advertise the company to the wider and broader market. This website can also be used as a medium or way of encouraging advertisement from the advertisers.
The company can also take advantage of the growing popularity of the Twitter. This is considered as one of the primary strategies which are used by different online businesses and organizations in order to drive traffic to the source of the news. The New York Times is already taking advantage of this strategy.
6.2 Long-term Steps
The actual implementation and launching of the website will be processed. After the initial marketing and technology introduction to the customers, it is vital to focus on implementing a website that will offer the actual service and product to the customers.
In the process of launching the website, it is important to include a feature which will enable the reader to personalize their page. This will enable them to order some of the elements in the page, and enable to change some of the properties such as the colour, background and font. This is very important because it can help in order to improve the usability of the website, by focusing on the aesthetic, which will serve as aid for those with eye problems such as colour blindness. One of the first newspaper companies implemented this feature was BBC.co.uk.
It is also important to take advantage of the growing number of mobile gadgets. By doing this, it is important to create an online framework which can be accessed by mobile users. This will focus on the overall development and design of the website, which will enable to offer high resolution but light in weight interface for the mobile users.
7.0 References
Barnhurst, K & Wartella, E 2000, ‘Newspapers and Citizenship: Young Adults’ Subjective Experience of Newspapers’, Critical Studies in Media Communication, vol. 8, no. 2, pp. 195 – 209.
Chen, S 2009, Newspapers Fold as Readers Defect and Economy Sours, CNN, http://edition.cnn.com/ (accessed May 11, 2010).
Chicago Tribune 2010, Newspapers, Paid Print Circulation Down Again, Seek New Story,http://newsblogs.chicagotribune.com/ (accessed May 11, 2010).
Cho, H, Martin, H & Lacy, S 2006, ‘An Industry in Transition: Entry and Exit in Daily Newspaper Markets’,Journalism and Mass Communication Quarterly,vol. 83, no. 2, pp. 381+.
Daft, R 2009, Organization Theory and Design, Cengage Learning.
Dahir, A L 2009, Saving the Newspaper Industry in America, http://upiu.com/ (accessed May 11, 2010).
David, F 2006, Strategic Management: Concepts and Cases, 10th edn. .
Deveson, M 2009, Crisis in the US Newspaper Industry,http://news.bbc.co.uk/ (accessed May 12, 2010)
Kirchhoff, S 2009, The U.S. Newspaper Industry in Transition, Congressional Research Service, http://www.fas.org/ (accessed May 10, 2010)
Langeveld, M 2009, Newspapers Take a Bus Plunge: Circulation Plummets 10.6%, Nieman Journalism Lab (October 26), http://www.niemanlab.org/ (accessed May 10, 2010).
MacKenzie, I 2010, English for Business Studies Student’s Book: A Course for Business Studies and Economics Students, Cambridge University Press.
NPD, Organizational Structure, http://www.npd-solutions.com/ (accessed May 10, 2010).
Parr, B 2010, The Dire State of the Newspaper Industry,Mashable, http://mashable.com/ (accessed May 7, 2010).
Schonfeld, E 2009, The Wounded U.S. Newspaper Industry Lost $7.5 Billion in Advertising Revenues Last Year, http://techcrunch.com/ (accessed May 10, 2010)
Vanacore, A 2010, US Newspaper Circulation Falls 8.7%,http:finance.yahoo.com/ (accessed May 10, 2010).
What They Think? 2009, PRIMIR Report Predicts Future of Newspaper Industry,http://members.whattheythink.com/ (accessed May 11, 2010).
Key External Factors Weight Rating Weighted score
Opportunities
Internet 10% 2 0.2
Advancement of Mobile gadgets: cellphones, 15% 1 0.0225
iPhones, smartphones etc.
Local news coverage 5% 3 0.15
Support from the government 5% 3 0.15
Threats
Economic downturn 15% 2 0.3
Growing competition with the online
advertisers 15% 1 0.0225
Lack of interest of the public to newspaper 10% 1 0.1
Internet 10% 2 0.2
People who are willing to pay for newspaper
subscription is declining 5% 1 0.0025
Indirect competition from different layers 10% 2 0.2
of Newspaper
Total 100% 1.3475
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