Case 30
Yahoo Inc; Marissa Mayer's Challenge
Back in July 2015, Yahoo’s board of directors appointed Marissa Mayer as their Chief Executive Officer (CEO) which marked the first step of turning Yahoo’s performance around (Pearce & Robinson, 2015). Mayer’s appointment and ascension as the CEO of the organization was accompanied by numerous challenges. To start with, it was exhibited that Yahoo had been facing problems with their CEOs as they have employed seven CEOs in a period of 18 years of operation. Among the seven CEOs, 5 of them had left the company within the last five years from 2012 (Pearce & Robinson, 2015). The other challenge regarded the corporate governance which included the disgraceful resignation of the former CEO and the demands form an activist investor who influenced the strategic direction of the company by vying for the board seats (Pearce & Robinson, 2015). The other challenge was that Mayer had to make a subjective decision regarding the best proceedings on the partial sale of Yahoo’s investment in Alibaba Group. Generally, prior to presenting the strategic plans, Mayer had to tackle these challenges and present her ideas to the board members before the fall of 2012. Therefore, this paper will focus on some of the challenges that Yahoo endured after Mayer was appointed as the CEO and later make some recommendations to enhance successive performance of Yahoo Inc.
Challenges
One of the major challenges that had to take care of concerned the issue of investing in Alibaba Group which is a privately owned internet company in China back in 2005. Yahoo invested in this electronic commerce company for an equivalent amount of $1 billion for 40% equity share (Pearce & Robinson, 2015). Additionally, Yahoo handed over their responsibility of operation for China website to Alibaba Group. Later, Yahoo and Alibaba held negotiations back in 2010 with regard to their future investment and alliance. Unfortunately, Softbank invested 65% of the stake in invested 65% of Yahoo’s stake where 35% was owned by Yahoo (Pearce & Robinson, 2015). Furthermore, it was perceptible that Alibaba wanted to buy back its stake by Yahoo and also purchase a certain additional stake in Yahoo. On the other hand, Softbank wanted to buy out more of Yahoo’s stake. Therefore, Yahoo agreed the request on divestment by Alibaba as a strategic approach of minimizing their tax bill on their capital gains. Back in 2012, the annunciation was made that Yahoo would sell approximately 50% of its investment to Alibaba for an equivalent amount of $7.6 billion (Pearce & Robinson, 2015). Therefore, citing from the fact that Mayer was the new CEO for Yahoo, she was challenged on how to make proceedings for the investment by Alibaba. Thus, she was obliged to make critical acquisitions and cope up with shareholders’ pressure regarding the investment.
The other challenge concerned establishing Yahoo’s identity as it changed its investment as a technology company to media organization (Pearce & Robinson, 2015). It is perceptible that the company started as a technology organization where its principal source of revenue was advertising. However, after Yahoo ventured in the media business, many of its employees regarded that they worked for the technology organization. Therefore, this was a challenge to Mayer as she had experience at Google, which was a technology organization, and now was tasked to establish the identity of a company that shifted from technology to media business operation (Pearce & Robinson, 2015). Mayer had to make a subjective decision on what strategies to implement particularly in order to venture the growing markets (Asia and Africa). By 2012, internet was expanding and was moving to mobile platform where Yahoo had not ventured yet (Pearce & Robinson, 2015). This was a dilemma for Yahoo especially on whether to venture in the fast developing mobile internet or continue to support its traditional sources of revenue. These were some of the decisions that Mayer had to make and jump into conclusions which she would present before the board members in September that year.
Therefore, in order to guarantee future and continued success, there are several recommendations that can be proposed for Mayer to implement and adopt. The following are the strategies that can remedy the predicaments faced by Yahoo.
- Acquisition of many organizations that serve similar customer base as Yahoo
As aforementioned, it is factual that internet was growing rapidly to a level of venturing to mobile platform where Yahoo had only marginal presence. Thus, in order to move together with the encroachment of the internet, Yahoo ought to acquire and make alliances with companies that have adjusted to the changes in technology and have crucial presence in all of the required customer bases. As a result this will make sure that Yahoo has reached the growing markets such as Asia and Africa instead of adhering to their traditional sources of revenue. Additionally, the company should make different types of acquisitions that target towards achieving different objectives such as reaching new and targeted demographics, and creating their presence in mobile internet platform. This will increase their competitive advantage as they reach a wider customer base that is not being served by their major competitors.
- Launching brand extensions
Citing from the increasing competition and rapidly encroaching technology, it is factual that Yahoo needs to extend their product line in order to cope up with the stiffening competition in the media and technology market. For instance, Yahoo should venture in magazine and advertisement market as they change their identity. Furthermore, with the advancing mobile technology, Yahoo should make a significant venture in the market by making mobile applications that will enable their customers to connect direct to them. Through this mobile app, Yahoo will be able to launch their new products of which the customers will be well acquainted of. This will watch over customer retention and attraction with less promotion policies and strategies.
- Hiring of new and more personnel
In order to make the implementation n process effective, Mayer should hire qualified personnel from different fields that are related to the target venture of the company. For instance, prior to venturing in the mobile industry, Mayer should hire experts and engineers of mobile technology who will help the company venture in the market effectively and progressively.
- Creating strong audience growth
It is factual that in order to realize the available opportunities for Yahoo, Mayer ought to implement strategies that operate towards building new audiences. She should try to increase the number of active users in their website in order to make sure that the organization will retain its identity even after venturing in another business platform. Creating strong audience will help the organization reinvigorate its culture and expand its technical staff. Additionally, it is noteworthy that strong audience growth is the basic factor that will help the company transform effectively.
- General change of the organizational culture
It is palpably factual that the change in the organizational structure resulted to the corresponding change in the culture. Therefore, Mayer’s task was to help the company adjust to the change in the culture of the organization. In adopting this change, Mayer should implement new policies and initiatives that guarantee alignment of the company’s operation and the changes in culture. These policies and initiatives should encompass effective communication between Yahoo programmers and goal sharing among other staff members in the company. Additionally, Mayer should arrange meetings in certain specific days that will help the management meet with other staff members and collect suggestions and questions concerning operation of the company. Furthermore, these meetings will help in announcing new hires and changes made in the organizational structure. Precisely, this strategy of changing the organizational culture will make sure that employees are ready to take change and minimize risks that are associated with employees’ reluctance to change.
- Setting new goals and objectives
Citing from the fact that Mayer was appointed as the CEO when the company was undergoing a new transition, it is worthwhile that she should go to the basics and start focusing aggressively on new goals and objectives regarding the transition of the company. This can be achieved through different changes in the organizational culture which will affect every level of the organizational hierarchy. After changing the interior of the company, Mayer should go ahead and implement different strategies that will help in regaining the competitive advantage of the company in the new market. However, Mayer should be vigilant to changing the general culture as there are values of the earlier culture that determined the success of the company up to date.
- Benchmarking systems of the potential competitors
It is perceptible that the easiest way of regaining competitive advantage by Yahoo is to benchmark the structures and systems adopted by major competitors such as Google and others. This was the same strategy that Google used against Yahoo after it decided benchmarking Yahoo’s revenue structure some years ago (Henry, Sutorius & Thacher, 2007). Therefore, through using the current system adopted by Google as the starting point, Yahoo can be able to leverage their competitive advantage. Additionally, benchmarking competitors’ system and structure will be economical to costs compared to inventing an innovative mechanism from the scratch (Henry, Sutorius & Thacher, 2007). This will give Yahoo first recovery by regaining the first-mover competitive advantage as Google and other major competitors are doing.
Conclusion
It is perceptible that Marissa Mayer was appointed as the CEO when Yahoo was in high need of successful transition and retention of its reputation. Therefore, Mayer was tackled by different challenges regarding acquisitions and organizational performance in a new market. Therefore, in order to promote effective operation of Yahoo and retain its competitive advantage during the new transition, Mayer should make several implementations. These implementations include acquisition of numerous organizations, launching brand extension, making new and more hires, creating strong audience growth, changing the general organizational culture, benchmarking systems of the major competitors, and setting new goals and objectives for the company.
References
Pearce, J. A., & Robinson, R. B. (2015). Strategic management (14th ed.). New York, NY: McGraw Hill.
Henry, A., Sutorius, B., & Thacher, T. (2007). Strategic report for yahoo inc. Gotham Global. Retrieved from http://economics-files.pomona.edu/jlikens/SeniorSeminars/gotham2007/reports/yahoo.pdf
