jump to navigation

Empire Building at Google? April 14, 2007

Posted by K.C. in advertising, allances, Marketing, media, Merger.
5 comments

Recently, Google purchased DoubleClick, an online advertising company, for $3.1 billion. This is yet another large purchase from Google who paid half of that for YouTube last year. DoubleClick is one of the top online advertising companies who specialize in software for display advertising and has close relationships with various web publishers. For some time now, Google has had its eyes on DoubleClick because of their success in display advertising. Display advertising is essentially the picture ads on the banners and sides of websites. While Google is also an expert in online advertising, they have not been able to capture every aspect of online advertising. Google’s advertising strengths lie primarily upon small text ads that pop up when a user completes a search.

 DoubleClick’s strengths on the other hand, “…lie in flashy banner ads and, more recently, video ads that are more like high-end magazine or television ads.”  

 Purchasing DoubleClick means that Google will be able to track user patterns much more closely in an attempt to produce smart ads that are based upon a user’s interests and search habits. As usual, analysts argue that $3.1 billion may be excessive but DoubleClick had similar offers from Microsoft, AOL, and Yahoo, its closest rival.

 

In the eyes of internet users, online advertising may seem ineffective but with this large purchase of DoubleClick, Google may know yet another thing we don’t.

Starbucks, not so evil. April 5, 2007

Posted by Jordi in allances, brand.
3 comments

They are on list of best 500 employers…

They deal with fair trade coffee.

Global Exchange has had some success.

In 2000, a campaign by thousands of activists across the country pressured Starbucks to carry Fair Trade coffee in all their cafes. See press release and detailed history for more information. As a result, on October 4 Starbucks introduced whole bean Fair Trade Certified coffee at over 2,300 stores, which brought the number of Fair Trade outlets to almost 5,000 nationwide (it’s currently over 7,500).

CBS Cashing In March 6, 2007

Posted by collage9 in advertising, allances, Internet, media, monopoly.
2 comments

We all know about the excitement that March Madness brings every year, especially with the recent success of our basketball team in the tournament.  I know I’ll be watching intently as I do every year.  But perhaps this biggest winner in all of the excitement is CBS, which has the exclusive rights to televise every game in the tournament.  This year TV ad spending is expected to surpass $500 million, which would be a record high.  Everyone knows how big of a deal advertising is during major sporting events, and CBS is definitely cashing in. They also aired this years Super Bowl, which as we all know probably has the most sought after advertising spots on television.

Not only is CBS making money on the television advertising, but they are also beginning to air games on the internet.  Starting last year CBS decided to make available all games over the internet for free and the idea was a hit.  Previously, they had charged $19.95 for the service, but after deciding to air them for free the number of users watching sky rocketed.  The important thing is that the internet broadcasted games will feature different commercials than the television broadcasts.  Not only will companies be vying for the rights to television spots, but now also on the internet as well.  In addition to the internet broadcasts, CBS has also made a deal with DirectTV to create a Mega March Madness Package for $69 that will air every tournament game.  Basically, the company is making a killing off of the yearly tournament and are really the ones driving their competitors mad.

Going Green in New Orleans March 6, 2007

Posted by Lady in allances, Business-Society Issues, environment.
1 comment so far

Keeping along this “going green” topic, I recently read an article titled, “Going Green in New Orleans” that displayed how many installation companies are donating solar systems to some of the victims of Hurricane Katrina and Rita. The victims were selected through a lottery pool. On my initial reading of this article, I had nothing but a positive response to the efforts of the installation companies. While many efforts have been made to restoreNew Orleans, this is by far one of the largest efforts being made. In my opinion, it’s like going beyond the call of duty.

But after I pondered this situation even more, I began to question the motives of these installation companies. Is it simply part of their “culture” to promote the use of solar energy because it is good for the Earth? Or was their act of jumping at an opportunity to help with the relief efforts simply the result of business interests?

One of the victims who had received the solar system expressed her gratitude in the article and also said that her neighbors might even be jealous of her. Might the existence of the solar systems in the Lower 9th Ward serve as a type of advertising for these installation companies? Might more residents in New Orleans create an increased demand for these solar systems? Did these installation companies think about these possibilities as they decided to get involved in the relief efforts of New Orleans? In my opinion, I don’t think that they made this move only with the motive of helping the Hurricane victims. I think they saw the direct advantage that they could gain with promoting this “going green” campaign.

I know it may seem like a stretch of the imagination but I just wanted to display how organizations may indirectly use this “going green” campaign as a competitive advantage in their industry. So my question is: Even if this was their motive, doesn’t everyone benefit from the cause? Or might this be a shameless attempt to take advantage of the victims of New Orleans. Is there anything wrong with this?

Going Green March 5, 2007

Posted by Kira in allances, Business-Society Issues, environment.
1 comment so far

The more companies are recognized as being responsible corporate citizens, the more they will profit financially and the better chance they will have to survive in the future. With all of the recent discussions on global warming, some companies are taking steps to make sure that they are perceived as environmentally responsible. Just as companies need to adapt their products to changing consumer tastes, they now must adapt to their customers changing wants and needs for a safer environment.

I just read an article in BusinessWeek that states that corporations are building alliances with environmentalist groups in order to be considered as more environmentally responsible. This is contributing positively to the businesses bottom line and to their public image. Just as a business has its own culture inside the organization, it also operates in a culture that exists on a broader scale. Right now, the culture in which businesses operate is going green.

Companies have fought being environmentally friendly for so long and that is a major reason why we face global warming to the extent that we do today. By allying with environmentalist groups, companies are strategically aligning with their former enemies. This is a smart business move because now companies can use being environmentally friendly as a competitive advantage. This will also allow companies to build their reputation which is very important. Every business wants to be first to market. If companies use this as a competitive advantage then other companies will eventually follow suit and hopefully all businesses will be safer for the environment.

I never thought of the idea of businesses aligning with activist groups. I always think of business alliances or mergers as between two companies that produce products for profits. In the short-term, companies will probably lose money since they have to change their means of production to be safer for the environment. However, these initial expenses will be offset due to savings realized by going green. For example, windows that cost more today will hold in the heat better and reduce heating costs later on.

Over time, companies that are environmentally friendly and are supported by environmentalist groups will be more competitive. As a customer I would be more inclined to support and invest in a company that is going green. As an employee, I would rather work at a corporation that was green rather than one that was harmful to the environment. Therefore, corporations that are green will be able to attract and retain a more loyal and more productive workforce. Hopefully, other companies will catch on and do the same.

 

What do you think of the strategy of allying with an activist group? How do you think an alliance like this would be implemented? Do you think that companies could use “going green” as a long and/or short-term competitive advantage?

Aluminum… February 14, 2007

Posted by Brian Mulligan in allances, Merger.
2 comments

Since we’ve mentioned Alcoa, the aluminum giant, in class so many times I decided to do a little research of my own and this is what I discovered and it raising some interesting questions:

In current news, Alcoa has been at the forefront of a large buyout my mining companies. Alcoa is may be bought by either BH Billiton or Rio Tinto. These two firms are large mining firms that are looking to integrate the production of aluminum into their business. Why would they want to do this?

According to the The Mineral, Metal and Materials Society the demand from China is going to drive the price and demand for aluminum in the coming years. The statistics show that China will, by 2020, be the largest consumer of aluminum over the US, Japan and Canada. Of course, it may be lucrative endeavor for these two mining companies to pursue this. Here is the article from the Mineral, Metal and Materials Society on the Chinese demand for aluminum and the potential business growths and faults. The articles is named “The China Factor: Aluminum Industry Impact”

The growth is there in the aluminum industry, so if the mining company can combine production and mining together then it will be beneficial for the company to cut down on transaction costs. This could also pose a major problem with competition among both the producers and the mining companies. If these companies keep up with the pace, they will form an industry dominated by specific providers of certain minerals and metals. This may destroy any form of competition and cause prices to rise.

Cnn.com actually has articles out analyzing what may potentially happen with this need to combine a large mining company with a production company. The name of one article is “Aluminum get hot. Who’ll get bought next.”

The article analyzes the situation from the standpoint of the mining company. Although, Alcoa is the largest aluminum producers in the world; it carries along with it assets downstream such as aluminum foil production facilities that the mining companies don’t want. Cnn.com says that it may be a better bet to buy out the second largest aluminum producers from Canada, Alcan. It has less assets downstream and is cheaper.

“Alcan makes more sense. It would cost less and it has no downstream business,” Charles Bradford, an analyst with Soleil-Bradford Research said.

This raises the question of analysis. A company would have understand the transaction costs associated with each and make a decision. What you do think these two mining companies should do?

MySpace hits a snag with Google February 7, 2007

Posted by Brian Mulligan in allances, Internet, Merger.
1 comment so far

I read this interesting article from the wall street journal titled, “MySpace’s Pact with Google Hits a Snag” early this morning about how MySpace is trying to team up with eBay to allow MySpace users to sell items on their homepages through EBay and their PayPal payment system. Google isn’t too cool with this third party decision since their 900 million dollar deal with MySpace from 2005 may become a potential roadblock.

Google has created it’s own new online selling database called Base with a payment system, similar to PayPal, named Checkout. Google has been stealing market share away from eBay in the past couple months and doesn’t feel that MySpace should work with a direct competitor if they are benefiting from the earlier Google – MySpace deal. Google and eBay have been viewed as partners in the past with eBay directly advertising on Google for product search, but Google is trying to gain market share by actually asking people selling products to advertise directly on Google. This will cut out eBay from the picture.

This article poses some interesting questions relations and structure between to companies that have come together for a joint-venture to benefit both parities. Google is paying 900 millions dollars to MySpace, owned by News Corp, to control ad space on their websites. Also, MySpace would have access to the Google’s search engine. The new deal has created many new synergies between the companies that have reduced costs and increased the traffic on both the websites. Also it have proved to be a great way for advertisers to use the web as a medium to reach potential customers.

Along with these great benefits, there comes some extra baggage and commitments that you have to adhere to. The more tight a relationship reduces uncertainty, but creates more connectivity and dependence between companies. This relates directly to our reading from last week concerning the ideas of transaction costs. Both companies reduced transaction costs. MySpace utilizes Google’s strong search engine and shares the revenue from the ads the Google controls on MySpace.

It posese just one question. Although this deal reduces transaction costs, a joint ventureship may shut you out of potentially more profitable ventures. Is it worth it?

Sprint Nextel struggling since merger February 6, 2007

Posted by Kira in allances, Merger, Organizational Culture, Organizational Design.
4 comments

In December of 2004, Sprint announced that it would acquire Nextel to create the third-largest wireless phone provider in the country.  The merger was thought to be a good idea since Nextel had loyalty from construction crews, taxi companies and other businesses that liked their press-to-talk feature and Sprint was building itself as a world leader in developing content for the consumer market.  It seemed as though what both companies were bringing to the table would complement each other in a positive way and that merging was a good strategy for managing the two company’s interdependencies.  However, years later the merger is still struggling to be completed.  When one company takes over another, there are great expenses and problems faced in managing the new business. Technology problems, strong competitors, and cost-conscious consumers are adding to the difficulty of the Sprint Nextel merger.  Many customers are leaving Nextel because they are frustrated with service problems that the company is blaming partly on technology.  As discussed in our text book, a main problem that is faced by a merger is the coordination and blending of corporate cultures.  

“Since the deal’s consummation, however, the company has fallen behind its competitors as it struggled to blend the two corporate cultures and assimilate a host of acquired affiliates.  It’s also been criticized for a marketing plan that experts said has ignored the different desires of Sprint and Nextel customers.”  http://www.businessweek.com/ap/financialnews/D8MINRCG0.htm?chan=search

            Sprint Nextel executives are aware of the customer service problems and plan to spend $8.5 billion in the coming year, mostly adding signal sites and improving signal quality.  The company also plans to revisit their marketing plans to better sell their strengths. 

 By not aligning two companies’ corporate organizational designs and cultures in a merger, it is easy to understand how the company could decline.  The process of value creation slows down and because the companies are unable to adjust to changing conditions they face competition and a loss of customers. The main goal of most companies is to be able to adapt to customer tastes and preferences and provide excellent customer service because without customers there would be no company.  The insights on Amazon and McDonald’s in chapter 4, discuss the importance of the link between the customer and the organization.  Both companies discuss their challenge to change to decentralized control as a way to empower employees to find ways to better meet customer needs and provide better customer service. 

 Although the article does not give any information about the current organizational structure of Sprint Nextel, it sounds as though they are more centralized and mechanistic based on the reasons given above for the difficulty of the merger.  Based on Amazon and McDonald’s experience, a more organic approach would allow Sprint Nextel to respond to customers’ needs and competitors’ moves.  Although the company does plan on investing a lot of money on their customer service problems, they do not address the organizational issues that may need to be handled in order to fix their customer relations and competition problems.  It is good to see that Sprint Nextel recognizes there is a problem and is willing to spend $8.5 billion to fix it, but if the problem is rooted in their organizational structure then spending all that money may ultimately be wasted.  I am curious to see if the company also works to reorganize their structure and if they can finally complete the merger after all these years. 

Newspapers vs. Online news January 31, 2007

Posted by Stephanie in allances, Internet, media.
1 comment so far

In the January 29, 2007 edition of Business Week, an article titled Yahoo’s Unlikely Amigos reported that many newspapers are considering joining the online world through an association with Yahoo. As “the world’s most visited home page,” Yahoo clearly has a lot to offer other companies who desire and more or less need the public’s attention on a daily basis. The nine companies involved represent 215 U.S. daily papers that hope to increase stock prices which have been sharply declining as more readers use online sources for news.

 

This raised my interest in the change of how people receive daily news. Just as the television revolutionized the 1960’s, online news seems to be taking great strides on traditional printed papers. Although “local TV news remains the most accessed source of news” according to a study reported by Rupert Murdoch , younger consumers prefer and are using the internet far more often. Of the study,

“44 percent of the study’s respondents said they use a portal at least once a day for news, as compared to just 19 percent who use a printed newspaper on a daily basis.”

 

Still some people are not as concerned with the possibility of the demise of printed newspapers. Just as the threat of television news occurred, some say that newspapers will remain in circulation. http://news.bbc.co.uk/2/hi/programmes/click_online/6220424.stm

 

Do you prefer reading news online or have a physical paper in front of you? Would you pay to view news online?

 

The original article about Yahoo refers to the association between the companies and Yahoo as a consortium. This interested me as the textbook in Chapter 3 talked about alliances, mergers and takeovers. The article interchanged “consortium” and “partnership.” I was not sure the exact differences and how to categorize the situation of Yahoo and the newspaper companies.

According to Wikipedia, “a consortium is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal. Each participant retains its separate legal status and the consortium’s control over each participant is generally limited to activities involving the joint endeavor, particularly the division of profits. A consortium is formed by contract, which delineates the rights and obligations of each member.” http://en.wikipedia.org/wiki/Consortium

With that in mind, I believe that the agreement would be considered a strategic alliance as they are still mutually benefiting from the relationship to achieve a common goal while still remaining independent. What do you think? Should they merge instead? Do you think Yahoo will eventually takeover newspapers companies?