CLOSING CASE - News Corp Forges Ahead
News Corp CEO Rupert Murdoch engineered acquisition or divestiture decisions for more than 50 years. Murdoch has created 1 of the 4 largest and most powerful entertainment media compa¬nies in the world. What strategies did Murdoch use to create his media empire?" Murdoch was born into a newspaper family; his father owned and ran the Adelaide News, an Australian regional news¬paper, and when his father died in 1952, Murdoch took control. He quickly enlarged the customer base by acquiring more Australian newspapers. One of these had connections to a major British "pulp" newspaper, and Murdoch used a sensa¬tional, National Enquirer-like, business model to establish his new newspaper, The Sun, as a leading British tabloid.
Murdoch's reputation as an entrepreneur grew because he showed that he could create a much higher return (ROIC) on the media assets he con-trolled than his competitors. This enabled him to borrow increasing amounts of money, which he used to purchase well-known newspapers such as the British Sunday Telegraph, and then his first U.S. newspaper, the San Antonio Express. Pursuing his sensational business model further, he launched the National Star. His growing profits and reputa¬tion allowed him to continue to borrow money, and in 1977, he bought the New York Post. Four years later, in 1981, he engineered a new co when he bought The Times and Sunday Tim Britain's leading conservative publications-a f cry from The Sun tabloid.
Murdoch's strategy of horizontal integration through mergers allowed him to create one of the world's biggest newspaper empires. He realized, however, that industries in the entertainment and media sector can be divided into those that provide media content or "software" (newspapers, movies, and television programs) and those that provide the media channels or "hardware" necessary to bring software to customers (movie theaters, TVA channels, TV cable, and satellite broadcasting).
Murdoch decided that he could create the most profit by becoming involved in both the media software and hardware industries, that is, the en-tire value chain of the entertainment and media sector. This strategy of vertical integration gave him control over all the different industries, join-ing together like links in a chain that converted inputs-such as stories-into finished products like newspapers, books, TV shows, and movies.
In the 1980s, Murdoch began purchasing global media companies in both the software and hardware stages of the entertainment sector. He also launched new ventures of his own. For example, sensing the potential of satellite broad-casting, in 1983 he launched Sky, the first satellite TV channel in the United Kingdom. He also began a new strategy of horizontal integration by purchasing companies that owned television stations; for Metromedia, which owned seven stations that reached more than 20% of U.S. households, he paid $1.5 billion. He scored another major coup in 1985 when he bought Twentieth Century Fox Studios, a premium movie content provider. As a result, he had Fox's huge film library and its creative talents to make new films and TV programming.
In 1986, Murdoch decided to create the FOX Broadcasting Company and buy or create his own U.S. network of FOX affiliates that would show programming developed by his own FOX movie studios. After a slow start, the FOX network gained popularity with sensational shows like The Simpson; which was FOX's first blockbuster program. Then, in 1994, FOX purchased the sole rights to broadcast all NFL games for more than $1 billion, thereby shutting out NBC. FOX became the "fourth network," which has forged and, with Murdoch's sensational business model, was one of the first to create the "reality" programming that has been popular in the 2000s.
By 2005, Murdoch's business model, based on strategies of horizontal and vertical integration, had created a global media empire. The company's profitability has ebbed and flowed because of the massive debt needed to fund Murdoch's acquisi¬tions, debt that has frequently brought his com¬pany near to financial ruin. However, in 2009, his company is still a market leader because he en¬gineered so many new Internet acquisitions, such as MySpace, Rotten Tomatoes, and other popu¬lar Websites that he has used to create even more value from his media assets."
1. What kind of corporate-level strategies did News Corp pursue to build its multibusiness model?
2. What are the advantages and disadvantages as-sociated with these strategies?
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