Yahoo! Marissa Mayer’s Challenge Case Study
The case you will analyze is, “Case 30: Yahoo! Inc.: Marissa Mayer’s Challenge.� In preparation for your case analysis, read “Guide to Strategic Management Case Analysis” in the text, which provides valuable advice on how to analyze a business case.
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Marissa Mayer’s Challenge
Introduction
Plagued with adverse management challenges, failed business strategies and evident loss of industry dominance, Yahoo! Inc appointed Marissa Mayer to head the organization, in the hope that she would re-invent it to its former glory. Having worked as an executive at Yahoo greatest competitor Google, Mayer is expected to bring in her expertise to address the challenges at the organization. Mayer faced a significant number of challenges including the need to change Yahoo’s culture towards greater innovation, less bureaucracy and higher employee productivity; low financial performance in comparison with other players in the market; and the management of funds obtained from Yahoo’s sale of its share at Alibaba. Mayer was expected to steer the company towards a stable direction, having experienced a major leadership crisis leading to constant change of CEOs, especially within the last five years. This case study will address some of the challenges and problems that Mayer faces, with an objective of suggesting workable recommendation for Mayer and Yahoo.
Yahoo’s Background
The determination of two Stanford University students, Jerry Yang and David Filo, to find a means of tracking their favorite web pages on the internet marks the genesis of Yahoo Inc. In February 1994, Yang and Filo developed a list of websites and as the list got longer, they categorized them into subgroups for easier management. This was later followed by the development of the Yahoo! Website, which the pair came up with as a means to categorize their growing list and enable easy search of the websites. The search engine eventually gained popularity among friends and other students as a way of finding websites on the internet.
In the fall of 1994, the duo began considering the venture as a business opportunity, when the site eventually reached a millionth user hit. Having obtained venture capital to get the business going, Filo and Yang appointed Motorolla veteran, Tim Koogle to head the business as CEO. Yahoo recorded exceptional growth, providing the earliest World Wide Web online navigational guide; before using its platform to sell advertising space. In April 1996, the company went public and soon after expanded into Europe and Japan, forming Yahoo! Europe and Yahoo! Japan; which would ensure that the company offers its services to users worldwide.
By 2001, Yahoo was employing 3,000 people, making over $717 million in annual revenues and owned 24 global properties. Appointed in 2001, the new CEO Terry Semel led Yahoo into new ventures and the company consequently gained revenues from music, photo sharing, blogging and posting. Over the years, Yahoo continued to develop new products in line with market needs and competition. Yahoo mostly generated revenue from advertising space, listing fees and transaction fees. Major products included Yahoo! Homepage, Yahoo! Finance, Yahoo! News, Yahoo! Sports, Yahoo! Shopping, Yahoo! Answers, Yahoo! Travel; all which are updated with content to ensure traffic to the website. Management of Yahoo’s global business is done geographically and consists of three segments including the Americas, Asia Pacific and Europe, Middle East and Africa (EMEA). To increase its reach, Yahoo had sites in forty five languages across sixty countries.
Problem statement
As Merissa Mayer enters Yahoo as the CEO, she is faced with various issues, which she must address to prove her ability to revolutionize yahoo. To begin with, Mayer comes into a company which has been managed by numerous CEOs and the biggest challenge remains giving a new and stable direction from the company. As the fourth CEO in 2012 alone, Mayer is faced with the challenge of establishing which direction Yahoo should take, having been steered to different directions by the various CEOs (Tsukayama, 2012). There are high expectations that Mayer will turn the company around, given her expertise and pressure is therefore on her to deliver.
Yahoo faced stiff competition from new entrants, with Google proving to be the biggest threat. Combined with low economic times, Yahoo’s performance deteriorated and company even laid off some employees in 2008 and 2010. The company struggled with management crisis over the years, constantly changing the management in a bid to revive the company. Jerry Yang would later replace Semel as CEO in 2007 and later pave way for Carol Bartz, who was then followed by Tim Morse and Scott Thompson in quick succession. Yahoo’s competiveness failed to improve despite the various strategies adopted by the various CEOs. It also faced a significant amount of internal politics and investor unrest that caused constant ripples in the organization’s operations. Microsoft made several attempts to acquire Yahoo but their bids were considered undervalued.
The financial performance of Yahoo has been declining over the years and while the company performed exceptionally well during its initial years, the share price has slowed down considerably over the years. This can be attributed to high levels of competition as well as lack of innovation in strategy, causing the firm to lose to competitors including Google and Microsoft.
The graph below indicates the stock price trend during the tenures of various CEOs in Yahoo’s history.
Essentially, Marissa Mayer is faced with various challenges including the following:
- Enhance efficiency at the organization and change the corporate culture in order to promote performance
- Deal with the high level of competition in the industry
- Deal with redundant policies, processes and bureaucracy
- Guide the organization into forming an identity; either work focus on being a technology firm or a media firm
- Establish the best manner to invest the proceeds from selling half of its investment at Alibaba
- Promote growth by targeting new markets
Alternative solutions
Marissa could begin by working on the organization’s culture to eliminate the redundant policies, processes and bureaucracy that threaten innovation and creativity. Beltrán-Martín and Roca-Puig (2013, p. 646) notes that employees are more likely to be flexible and innovative where they are given an open environment to work in and where their capabilities are not limited by bureaucracies. Mayer should encourage direct interaction with employees and ensure that each creative suggestion can be accommodated. In addition, she must instill a working culture that enables employees to be creative and proactive in their work in order to ensure that the company keeps up with other companies such as Google which fosters a creative culture Lowe (2009, p. 9). A change in culture would certainly face resistance as employees adjust to the new policies, hence the need to introduce change gradually.
Yahoo needs to focus on one strategy and excel on it as opposed to taking on a variety of products and having average or poor results. As much as diversification spreads risk for the company however, specialization is also considered effective because it allows the management to focus all its energies into enhancing success of the chosen product. Yahoo for example could focus on search and thus work towards marketing itself as a niche solution when it comes to search. The company could also focus on being a media company, and follow this strategy to excel in this field. While this strategy is effective in promoting a focused organization, it is apparent that the internet business is highly competitive and specialization may limit the organization’s earnings (Chickowski, 2008, p. 12-13). Furthermore, Yahoo already possesses skills and expertise in a wide array of internet solutions and it would be inappropriate to let go of all the investment they have made. In this regard, the solution would be to select a few number of businesses that are performing well and concentrate on these to bring more revenue to the company.
Mayer should leverage on the growing mobile platform to reach more users through Yahoo. Statistics indicate that more users than ever are accessing the internet through their mobile devices and this is expected to grow Fulgoni (2015, p. 116). This is indicated in the graph below.
Source: eMarketer, Dec 2014
The best solution would be to create content that correlates with what mobile users search for online. While this solution promises better user reach, it is important for Yahoo to realize that that every other internet-based organization is eyeing this strategy as a means to promote business, hence the need to be very innovative in their approach Chickowski, 2008, p. 13).
Mayer should use her strengths at search, acquired from Google to promote Yahoo’s performance in this sector. Mayer headed the Google’s search business for a significant number of years and therefore possesses the right skills of knowing what users want to see on the internet. She should then guide the organization into adopting the right skills to promote content development and thus increase traffic to Yahoo. This would not only increase the amount of advertising revenue but it would eventually lead to an improvement in the company’s share price. This approach like the any other means that the organization must face competitors, through coming up with innovative strategies to create a niche.
Mayer needs to increase the quality of the workforce in order to realize better organizational performance. It is clear that the industry has become highly competitive and the productivity of workers at Yahoo is questionable as indicated in the in the case study. This also includes providing extensive training for staff and research to ensure that the company possesses knowledge on the most current trends. In order for this alternative to work, Marissa must be willing to sacrifice some of the inefficient hiring policies as well as ineffective workers. This may create unrest within the company if now well executed.
Proposed Solution and Recommendations
The above suggested solutions present highly valid strategies that Mayer could adopt in creating a more productive Yahoo. The most suitable solutions based on the discussion above would be to change the organization’s culture, encourage innovation and productivity among employees and focus on mobile technology as an avenue to gain a niche in the online market.
As Mayer undertakes a change in Yahoo’s culture, promoting an innovative culture for employees should be a major priority. By allowing employees to be creative, eliminating irrelevant policies that limit innovation and maintaining an open door policy, Mayer could soon transform Yahoo through the employees’ potential (Tampu, 2015, p. 45). In an online study conducted by Ideacomb in 2012, it was established that talent management to a significant extent determines the innovation level in any industry. The report further established that most employees were not comfortable with the idea of the CEO being the only one responsible for innovation and would therefore desire to participate. Based on the responses obtained from the survey, employees are motivated to be more productive and innovative when they are recognized by the management and when they are given an opportunity to participate in the innovation process. The graph below is an indication that allowing employees to be innovative is a source of motivation.
Source: http://www.slideshare.net/spadeworxsoftware/role-of-hr-in-fostering-innovation-a-survey-report
In order to promote productivity, Mayer should go ahead with her plan to review all new hires to establish their potential and ensure that they will deliver quality work for the organization. In addition, she should ensure that the level of commitment among employees in the company is increased considerably within the organization. To achieve this, employees can be put under performance programs, aimed at assessing their contribution to the performance. Through this program, Yahoo will ensure that only the productive employees are maintained while inefficient ones are eliminated.
The mobile user platform promises great potential for Yahoo and Mayer should consider this as the next business for the organization. This involves identifying the content that mobile users are interested in, and thus work towards tailor-making the internet experience to suit mobile users. Through creating new applications and focusing on social media as a medium for reaching mobile users, Yahoo could transform into a media company that will derive significant gains from the mobile user population. Social media is a particularly fertile ground in reaching mobile users and Yahoo could create content that targets users of popular social sites such as Facebook, Twitter, YouTube, Pinterest, Reddit, Tumblr, Foursquare, LinkedIn and its photo sharing social media platform Flickr and among others. The traffic created could then be used to sell advertising space, thus earning the company its former glory.
References Beltrán-Martín, I., & Roca-Puig, V. (2013). Promoting Employee Flexibility through HR Practices. Human Resource Management, 52(5), 645-674.
