Strategic decision-making is very critical to the success of an organization because it determines the business ventures a firm is to undertake and their management. Making the wrong decisions may lead to loss of revenues, profitability and sometimes even to the collapse of a company.
The first symptom is the constant change of the board members and Chief Executive Officers (CEOs), which shows that the organization is not stable. Secondly, while Yahoo’s competitors such as Google and Microsoft have maintained or gained market share, Yahoo has lost part of its market to Microsoft in the search site market segment. Additionally, Yahoo’s revenues declined for three consecutive years up to 2010, a situation that led to the changes in the leadership of the company in an attempt to turn it around. Another sign of problems at Yahoo is the constant layoffs that characterize the company. The 2012 employee layoff was the 6th in a period of four years. The combination of all these symptoms points to the challenges at Yahoo.
The Identification of Goals
There are three goals that Yahoo should aim to realize. First, it should aim at increasing its revenue and profitability, which have been declining for several years. Both profitability and revenue are the main reasons for the existence of any organization. Without profitability shareholders cannot get value for their investment, which would limit the ability of Yahoo to solicit for funding from them. Revenue reduction can hinder cash flow and money available for the daily operations. Therefore, it is imperative for Yahoo to focus on improving revenue and profit generation to remain viable. The second goal is to maintain stability in the company. The leadership changes may drive away potential investors because no one would want risky investing in a firm that may collapse. As such, it is crucial for Yahoo to gain investors’ confidence by ensuring a stable leadership to steer it in the right strategic direction. The third goal is to increase market share and maintain the one it has. A large market share can increase the volume of sales and empower Yahoo to improve its competitiveness. The market share can help it compete with other players on prices by capitalizing on sales volume.
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The Analysis of Yahoo
The strategic management decision-making process at Yahoo is the main problem facing the company. The management of Yahoo has focused on geographical expansion and diversification of its investment. Consequently, it has lost control of the core mission, which has led to declining revenues. The advertisement business accounts for about 81% of Yahoo’s revenue. As such, the core business should be the advertisement. However, the priorities seem to be on technology, as indicated by the company’s hiring of two executives in 2012 with technological backgrounds. Daniel Loeb, an investor of Yahoo, is right by pointing out that the media business should influence the strategic direction of the company. The changes in leadership are attempting to treat symptoms instead of the problem, which is the lack of strategic direction. Since the management has not identified the actual problem, failure is likely to persist irrespective of the number of changes in leadership.
The first step for Yahoo to recover from its problem is to acknowledge that the media and advertisement represent its main business activities that should receive more attention than growth into other areas. Secondly, it should analyze all the businesses and sell off those underperforming. Divesting such investments would help the management to improve the performance of its core activities and increase revenues. Thirdly, after deciding to orient its efforts towards the advertisement, Yahoo should hire executives with experience in media and advertisement as opposed to technology. Such managers have the potential to improve the performance of the organization and eliminate the need to change the leadership. Consequently, Yahoo will gain stability, positive perception in the eyes of potential investors and promote revenue and profit generation.
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The Action Planning of Yahoo
The executives with the media and advertisement experience should lead the action planning. The management should delegate the duty of analyzing the company’s advertisement position in the market to the media and advertisement experts. After the identification of Yahoo’s strengths, weaknesses, threats and opportunities, the management should create a strategy to maximize the strengths and opportunities while minimizing the negative impacts of the threats in the market. Additionally, the management should create timelines within which to implement the strategy. Two years are enough to gauge the effectiveness of the plan and improve on the shortfalls. Yahoo should use the financial resources gained from the divestment of other businesses to ensure the success of its mission.
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The changes of leadership over the years, loss of market share and revenue, and employee layoffs are the symptoms of the problems facing Yahoo. The goals on which Yahoo should focus include improvement of profits and revenues, maintaining market share and stability. Loss of focus on the company’s priorities and strategies is the real problem. Leadership changes cannot solve the problem unless Yahoo understands that the advertisement is its core business. Yahoo should sell poorly performing businesses and employ executives with expertise in the advertisement to lead its strategic decision-making. The executives with advertisement background should lead the action planning process, conduct a strategic analysis of Yahoo’s advertisement sector and ensure timelines for new strategy implementation and evaluation.