Strategic Management

Assignment Topic: Report on BBC (British Broadcasting Corporation)

Baral Abita

Abstract

British Broadcast Corporation (BBC) was found in 1922 with a vision to inform, educate and entertain public. The BBC expands with real confidence and inaugurates its empire. BBC expands its services to radio broadcast, television, satellite and internet across arts, education and news. This report is related with the external and internal environment scanning of the BBC. The report explain short history of the BBC and what are the possible opportunities and threat for the BBC in current situation; and how can the BBC overcome with threat and utilize its strength to minimize weakness.

Table of Contents

1. Introduction

2. Culture of the BBC

3. Organization structure of BBC

4. Environment Scanning of the BBC

4.1 PEST

4.2. Porter 5 Competitive Force Analysis of BBC

4.3 SWOT Analysis

5. Product life cycle:

6. The Boston Box

7. Value chain analysis

8. Conclusion

Bibliography:

Appendix

1. Introduction

The British Broadcasting Corporation (BBC) is the leading broadcasting organization in the world (Crisel, 1997). It was established by Royal Charter and is overseen by license fee which is paid by UK families. The BBC offers eight national TV channels, including regional programming, 10 radio stations, 40 local radio station and widespread websites. The BBC World Service provides news and current affairs programmes to the world and broadcasts on radio, TV and online, offering news, entertainment and information in 32 languages and operating in many countries (http://www.bbc.co.uk/aboutthebbc/).

Due to developments in technology and changes in viewer preferences the Government came under pressure to establish a viable alternative to the BBC, this occurred in 1955 when the Government established the Independent Broadcasting Commission who made available licences to the newly established Independent Television (ITV). In the latter half of the 20^th Century both the BBC and ITV stations have come under more competition due to the launch of BSKYB which brought a completely different approach to broadcasting due to its ‘Americanised’ style of news journalism and available exclusively through satellite. The other major difference with BSKYB was that they charged the viewer a monthly fee.

As a result of this increased competition the BBC has literally needed to reinvent itself while also ensuring its traditional beliefs remain. According to James Wood (2000), no other international broadcaster has placed as great an attempt as the BBC to support its public in the broadcasting of fact:

“Free and untainted information is a basic human right. Not everyone has it but everyone wants it. It cannot by itself create a world, but a world cannot exist without it. However the reputation and respect which the BBC world direct all over the world is due to principle to be a non partisan organ and free of government control and approach of management.”

2. Culture of the BBC

a. Mission Statement

“To enrich people's lives with programmes and services that inform, educate and entertain.” ([1])

b. Vision statement

“To be the most creative organisation in the world” (2)

c. Values

“The BBC values in trust (independent, impartial and honest), customer oriented, taking pride, quality, creativity, respect and team work” (3)

d. Aim

The aim of the BBC is sustaining citizen, encouraging education and learning, motivating creativity and best culture, getting UK in world and world in UK, representing UK, delivering emerging communication and technologies (4)

3. Organization structure of BBC

Hit Ireland Hoskisson, (2003)

Fig. 1: Organization structure of the BBC

The organization structure of the BBC is a centralised structure and is highly bureaucratic. In the BBC, Board of Governor and Director General make decisions and passes those decisions to the managers at divisional level ensuring in each operating level follows the policy.

4. Environment Scanning of BBC

The environment scanning tool helps to understand external forces of change and internal changes, so that management can improve their position in the future (Chun Wei Choo, 2005). The environment scanning tools are PEST, Porters 5 competitive forces and SWOT analysis which are used to scan the environment of the BBC.

4.1 PEST

PEST is a tool for scanning a general environment. PEST stands for Political, Economic, Social-cultural and Technical environment (appendix 1). PEST is a useful strategic planning tool which helps to indentify changes in competitive business environment (Kotler, 1998).

4.1.1 Political

Political factors bring threat to the BBC. The BBC has a global presence in terms of news reporting and broadcasting. Therefore, the diverse geo-political environment can itself be consider as a political threat for the BBC because not all fairly reported news is acceptable for those diverse group of people. Truth is always bitter, people do not want to hear anything bad about them, even though that is truth or fairly reported news. And same things happen in case of government too. Another political threat of the BBC comes from news collection. The life of the news reporter is always at risk in some countries of the world. Extrusion, intimidation, abduction, and kidnapping are common problem or threat to the news reporter around the world mainly from active terrorist group. However, In case of domestic market political environment possess comparatively low degree of threat. Currently the BBC is facing political threat related to license fee. According to Davies (28^th Aug, 2010), former Chairman of BBC, "Greatest strategic threat for the BBC is that the licence fee will be 'top sliced'. Because its competitor BSKYB start raising the issue to license fee (http://www.bbc.co.uk/news/entertainment-arts-11111001)

4.1.2 Economic

One of the major economic threats for the BBC in domestic and international market is economic recession. World economy is facing a severe economic downturn because of that consumers are curtailing their expenses. Many residents of UK are losing their job because of the recession, due to high unemployment resident cannot afford to pay expensive license fee. Therefore, most notably customers are decreasing their entertainment expenses and leisure time expense which is domestic threat to the BBC.

4.1.3 Socio-cultural

One of the major socio-cultural threats in domestic and International market is huge cultural diversity with multi religion and multi language among the people. Though BBC does not broadcast only in English language, it cannot run all its programs on all of the language simultaneously to satisfy all kinds of people who believe in different culture and like to speak their own language. Besides this socio-cultural threat for the BBC in terms of news collecting and reporting is that not all people in the world speak and understand English language creating the need of language interpretation which is not always easy. Due to the change in customer preference and lifestyle of viewers, they are demanding for more better and diverse programmes with more variety which is socio-cultural threat to the BBC.

4.1.4 Technological

For approximately 60 years, the BBC enjoyed one method of broadcasting: traditional approach on T.V. and radio. Since late 70s’ and 80s’ satellite T.V. has allowed more competition to enter market offering a wider range of T.V. and radio programme. In Initial stage, BBC refused to air on satellite T.V. but pressure from viewer who purchased satellite system, finally force the BBC to give in. Now the BBC finds itself to re-invest allowing development in internet technologies and live streaming. However, the BBC is finding hard to compete against its competitors because of their innovative technology. Although the BBC provide satellite to viewers, it competitors BSKYB provide a wide range of service through a package. Package offers wide range of programme and viewer can choose their channel according to their preferences and choice. Therefore, technological threat that BBC is facing is advance and innovative information technology which its competitors are using such as digital T.V. and radio, satellite broadcasting. Beside this, fastest growing means of communication such as internet also replacing the news channels like the BBC.

4.2. Porter 5 Competitive Force Analysis of the BBC

According to Porter (1980), the capability of a company to gain a satisfactory breakeven depends on five forces:- the ability of new competitors to enter the industry, the threat of substitute products, the bargaining power of buyer, the bargaining power of suppliers and the rivalry among existing competitors(appendix 2). Porter (1985) believes that the collective strength of five forces determines industries profitability.

4.2.1 Threat of New Entrants

Threat of new entrance to the media industry could possibly come from newly opening news channels, both locally and internationally; thus the overall threat is relatively low.

The start-up costs for entering the industry create a serious barrier. Brand awareness and establishment cost would be higher due to the customer loyalty on existing news channels. Expensive licence fee and high capital investment with long payback period is another barrier for new entrance. In this industry, the barriers to entry is really high and the barriers to exit is low, therefore only the few companies can maintain their position in the market, while others companies could give up altogether or are merged with bigger firms.

In the news channel industry, currently there are fewer but more powerful companies, therefore strengthening the barriers to new entrants, and weakening the potential for new entrant success.

The BBC is already well established company in media; BBC has been around with its customer since long time and BBC has segmented its market in such a way that satisfy the need of each customers; which is the key factors that create the more band loyalty of customers towards BBC.

4.2.2 The Bargaining Power of Supplier

Suppliers’ power generally depends on volume purchase by companies. The more powerful suppliers are, the less profitable the industry is. Suppliers for the news channel industry come from both international and local dimensions, and each group holds different level of powers. Since the different countries have different rules and regulations regarding information they want to publish. International suppliers have more bargaining power than national suppliers.

The bargaining power of suppliers has medium high to medium low bargaining power, depending on the experience, popularity and demand of viewers/listeners. For example: if big celebrity such as Angelina Jolie, Brad Pitt, Tom Cruise, Metallica, etc are supplier then supplier would have high bargaining power, mean while if supplier are common actors, journalist, fresh graduate, product maker or have less experience, than supplier will have low bargaining power.

4.2.3 Bargaining Power of Customer

The bargaining power of customers of news channel industry is relatively higher due to the intense rivalry with in the news channel industry and substitute products are available in the market with lower price.

The bargaining power of customer of the BBC is relatively high. The reason why customers bargaining power is high is that the BBC cannot force customers only to watch their channel. Though the BBC is free in UK, they still have to pay licensing fees for TV and beside the BBC Customers have numerous choices to watch. At the same time ITV, Channels 4 and Channel 5 are also free in air. Further, viewers can get bigger package of channel when they subscribed in with BSKYB which increase the bargaining power of the customers.

4.2.4 Threat of Substitutes

The substitute products of news channel industry are news paper, magazines, internet, movies, social networking sites and others. The threat of substitutes to news channel industry is high due to many factors. To begin with, the same news and information are easily available from different substitutes with more convenience and low cost. Another reason is that switched over cost from news channel industry to its substitute is low.

In present situation biggest threat is social networking sites in which user can registered to create personal profiles and puts the blogs, video and songs, link to other users and communicates with them. Therefore the threat is a substitute product is relatively high.

4.2.5 Intensity of Rivalry among Competitor

The news channel industry has few competitors, most of whom hold significant percentages of market share. BBC basically competes with American news channel and other national channel such as ITV, BSKYB, and CNN. BBC is the leader in the news channel industry, which accounts for 40% of total market coverage in UK market. The company is able to leave its competitors behind by not changing any fees to its customers.

The intensity of rivalry among competitor is relatively high because the industry is slow growing market with few strong competitors. Even though customer loyalty is typical for industry, all companies are concentrated on implementing new competitive strategies, diversification, and distribution capabilities.

4.3 SWOT Analysis

SWOT analysis (strength, weakness, opportunities and threat) is a suitable tool to summaries the internal and external matters and to identify the expansions which are most likely to be profitable (Boddy, 2008).

4.3.1 Strength

The strengths of the BBC are:

· The BBC is a well known brand in the world of news, media and entertainment with powerful brand identification. (Alvesson and Thompson, 2004).

· Qualified human resources

· Strong supply chain both in domestic and international market

· Clear strategies and strongly focus on objectives and goals

· Image: The BBC (British Broadcasting corporation)

· Financially well-built and is proficient of introduction motivated campaigns.

· Well diversified products to meet requirement of each customer.

· It is run through government

4.3.2Weakness

The weaknesses of the BBC are:

· Out dated technology.

· Later adopter of innovative ideas and product offering.

· Provide fewer packages in satellite channel.

4.3.3 Opportunity

The opportunities of the BBC are:

· Expansion opportunity to developing countries such as Brazil, China and India.

· The BBC can extend all the service in internet targeting different group of viewers/ listeners.

· The BBC can extend its product line both in domestic and international market.

· The BBC can enhance its revenue by advertisement.

· The BBC can target niche market and youth viewers/listener.

· Placement in market as a powerful brand identity with loyal customer.

4.3.4 Threat

The threats of the BBC are

· Heavy competition with CNN, Fox News and other local media companies such as BSKYB, ITV, etc (Alvesson and Thompson, 2004).

· Possibility of new entrance from international brand.

· Threat to BBC’s source of revenue (currently greatest strategic threat for BBC is that the licence fee)

· High threat of substitute product such as Times newspaper, online news, internet, social networking sites, etc.

5. Product life cycle:

Every product has lifecycle. The life cycle starts from launch of new product and ends to the final withdraw of product. Product life cycle (PLC) have four phases, they are introduction, growth, maturity and decline (Gort & Klepper, 1982).

Though every product/service has life cycle, phases of life cycle of one product may vary from another product. For example, some product/services may go through introduction, growth, maturity, and decline stage while some other product may reach decline stage after the introduction stage. Similarly, media group also has its own lifecycle within a broadly defined market of televisions, radios, satellite, internet programmes. The evolution of mature media industries may therefore, significantly depart from the product life cycle of other products in general (Albarran et al, 2008). The product life cycle can be applied to whole industry, single business, and single business unit.

The BBC is in the mature stage of product life cycle, while its business units are in different stage of product life cycle. Currently BBC has following business units: BBC radio, T.V., satellite, internet and digital (T.V. and radio). The figure 1 shows the different stages of BBC’s business unit. Digital radio and T.V. of the BBC are in an introduction phase of product life cycle, satellite and internet division are in growth phase, and the BBC radio and T.V. division are in mature phase of product life cycle.

T.V. and Radio

Digital (T.V. and Radio)

Satellite and Internet

Fig. 2 product life cycle of different business unit of the BBC

Different products (programmes) which operate under broadcast radio and television business unit are in different stages of product life cycle. For instance:

· The program such as Wallander introduction and Criminal Justice are in introduction phase.

· The program such as Little Britain, Absolutely Fabulous, Strictly Come Dancing are in growth phase.

· BBC news at 9 O’clock, Match of a Day is in mature stage now.

· Program such as Olympic live, the Princess Diana funeral are decline.

6. The Boston Box

The Boston Box is a tool of portfolio management and also known as Growth Share Matrix. The Boston Box measure the position of company’s product according to market share and growth prospective. The product life cycle can be clearly linked to the Boston Box, which offers a way of examining a company portfolio. In Boston Box there are four boxes which represent position of product depending on stage of product life cycle. : Question mark denotes introduction of new product, Star denotes products which are in growth phase of product life and generate cash, cash cow denotes products in mature stage and generate cash, and Dog denotes products in decline phase. And there are two axes on the matrix; vertical axes indicate market growth which shows the potential and attractiveness of the market and the horizontal axis indicates market share which shows competitive position of the product in market.

In case of the BBC the Boston Matrix can be used to analyse portfolio of whole business, different business unit and product.

The BBC is in Cash Cow in Boston matrix which is in mature stage of product life cycle and has high market share and relatively low market growth.

Business units: The BBC TV and radio is in Cash Cow of the Boston matrix which have high market share and relatively low market growth. Satellite and internet are in Star of the Boston matrix which has relatively high market share and high market growth. And digital (T.V. and radio) is in Question Mark of the Boston Matrix which in introduction stage of Product Life Cycle and has high market grow and relatively low market share. Fig 3 shows Boston box of BBC business units.

Fig 3: Boston Box Matrix of the BBC units

Product: Programme such as Little Britain, Absolutely Fabulous, Strictly Come Dancing are in Star of the Boston Matrix which has relatively high market share and market growth. The BBC 9 O’clock News, Match of the Day is in Cash Cow of the Boston Matrix which have has high market share and relatively low market growth. Wallander Introduction and Criminal Justice are in Question mark of the Boston Matrix which in introduction stage of PLC and has high market grow and relatively low market share. Princess Diana Funeral, live match of world is in Dog of the Boston Matrix which has low market share and market growth. Fig 4 shows Boston box of programs that BBC offer.

Fig. 4 Boston Box Matrix of the BBC products line

Through the Boston box analysis, the BBC can identify different opportunities open to a company as a profile of core capability and how the BBC can developed to sustain certain existing business and leveraged to create a new business opportunities. For example to start more entraining and innovative programme such as strictly come dancing, little Britain, strictly fabulous and so on will create more opportunities for the BBC (Gary Hamel and C K Prahalad).

7. Value Chain Analysis

“Value chain is a tool that divides the firm into the discrete activities which the firm performs in designing, producing, marketing and distributing product and services” (Lee & Yang, 2000). It is a basic tool for diagnosing competitive advantage and finding a way to enhance it.

7.1 Primary Activity

BBC’s supply chain supports all of its business locations in 193 countries. The BBC clearly understands their mission is to enrich people's lives with programmes and services that inform, educate and entertain. All of their primary activities are concern to provide quality programmes and services which add value to customers.

a. Supply chain management

The BBC encourages procurement opportunities with a diverse community of suppliers all around the globe to provide diversified programmes and to make those programmes more informing, educating, and entertaining. It makes valuable contributions to the global economic growth educating the people about business, lifestyle, economic situation, and others. The raw materials for the BBC are raw news, innovative idea for program, conflict reports, and new story of the environment. BBC broadcast all their news from London as a central hub; therefore all those news are supplied to London.

b. Operation

The major business units of BBC are radio, T.V., satellites, and Internet. BBC’s main operation focuses on the events, happenings, phenomenon and cases which are occurring anywhere in the universe. Journalist, reporter, videographer, camera man, writer and other news collectors scattered around the world and they work as a complete team to convert events, wars, natural disasters, political matters, and business happenings into viewable news, and present those through their media to the public. The whole system works in network where all the players (journalist, managers and technicians) work in extremely furious and timely manner.

c. Distribution

After editing the raw news, conflicts reports, and innovative programme, distribution is carried out by the BBC. The distribution of the BBC is support by the head office and other unit of localized broadcasting channel of country in which BBC is operate.

d. Sales and Marketing

Marketing is carried out simply through brand positioning and advertising. The BBC has always been committed about maintaining customer loyalty. Because of free and untainted information broadcasting, viewers/listeners are loyal toward the BBC. The BBC does marketing in its own channel. For example: For 9 O’clock news, headline of the news is shown 24 hours on the bottom page of TV screen, which adds value. Further if the BBC launches any new programme it informs, persuades and reminds viewers though advertisement in its own broadcasting media which add value to viewers/listeners as well as for BBC.

7.2. Support activities

All those primary activities of BBC depend on the support activities. The support activities are:

a. Infrastructure

The digital infrastructure of the BBC is run through Leitch's NEO platforms which run all the channels and the BBC news digital video server system and its wider analogue environment. The infrastructure of the BBC is accommodating by NEO's through course-plotting, supplying, clock and signal reference products, etc.

b. Human resources

The BBC has high qualified human resources. Professional on research and development and expert on collecting and disseminating qualitative information are key success factor for bringing success to the BBC. Recruiting of high quality human resources with innovative and creative ideas bring more value to the BBC.

c. Technological development

The development of fast and innovative technology adds value to the BBC. With the change in preference of viewers/listeners, they are demanding for more better and diverse programme. Therefore the BBC has adopted the innovative technology to add more value to customers. For example: demand for the BBC satellite from viewers force the BBC to catch of the innovative technologies which add value to customers.

8. Conclusion

BBC has been proving itself as a successful business since its first establishment in 1922. Although, the BBC has faced different political, socio-cultural, economic and technological challenges and issues, it has overcome those challenges through its innovative ideas, culture and specialized human resource. Through environmental scanning tools, it is identified that the BBC is currently facing the threat of license fee and heavy competition. Viewers/listeners are demanding for multi-cultural and diversified programs. One of the major threats of the BBC is that it has heavy competition with CNN, Fox News and other local media companies such as BSKYB, ITV, etc and there is the possibility of new entrance from international brand in the market where BBC is currently dealing with. Not only this, but also there is the threat in BBC’s source of revenue. One way to minimize the impact of these threats or to mitigate their impact, BBC can expand its services offerings into emerging global power like Brazil, China and India. In addition to this, the BBC can extend all its services in internet targeting different group of viewer/listeners. And to tackle its threat related to its revenue, it can turn around and do more advertisement so that it can generate additional revenue to compensate its possible revenue loss from the licensing loss in the future. However, in order to maintain its current market share and to be more competitive BBC may have to prepare itself for more technologically adoptive company by quickly adopting any technological change in the market place along with introducing itself as a first mover in innovative ideas and product or service offerings.

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Appendix

Appendix 1: PEST Analysis

Domestic market	International market
Political · environmental legislation, · governing of employment rights, · health and safety practice for employee (insurance policy for employee), · public expenditure control, · government stability, · employment law, · company law, · business regulation, · EU laws, · media law, etc	· political stability of the country, · patent and intellect property policy, · government attitude to foreign investment, political systems (democracy, totalitarianism or communism), · tariff policies and trade agreements, · employment protection · law company taxation policy.
Economic: · viewer/listener confidence towards it · the wages rate · interest and inflation rate in country · the number of viewer with in UK · the business cycle · unemployment	· exchange rate, · currency stability · relative growth rate of economy · rules on repatriating company income
Socio-cultural · changing lifestyle · attitudes towards work and leisure, · changing taste and preferences of the consumer, · time that consumer spend on leisure and how, · the immigrate that are migrating in UK · their level of education ·	· religion · cultural differences · education level and policies · differences in customer habits · preferences and value · attitudes towards foreign staff and companies, · working practices and working hours · workplace diversity
Technical · changing communication technology, · new production of digital media and technology, · rate of technology transfer, · emerging technology, · alternative means of providing service	· telecommunication systems, · volume and stability of power supplies, · transport infrastructure for country, · availability of competent local suppliers, · emerging technology

Appendix 2: Porter 5 Competitive Force Analysis of BBC

Forces	Magnitude of Forces	Conclusion
Intense Rivalry	Strong	Strong rivalry decreases the profit potentials of the industry.
Suppliers power	Moderately weak	Weak bargaining power of the suppliers increases the profit potentials.
Buyers Power	Moderately Strong	Strong buying power of the buyers decreases the profit potentials.
Threat of Substitute Products	Moderately strong	Strong threat of substitute products decreases the profit potentials.
Threat of new entrance	Weak	Weak threat of new entrance increases the profit potentials.
Comment	Industry is well established with numerous recognized brands. Buyers’ power is moderately strong which reduce the profit potentials. Industry has threat from other substitute industry. Industry may be slightly affected by new entrance of existing brand.