TiVo Case Study: Strategic Management

Relevant factors: The major issues that need to be addressed in this case study would be in terms of competitive advantages, marketing, globalization, pricing economies of large-scale business, patent protection, innovativeness, and product development.

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Irrelevant factors: These would be in terms of technology impact (since this is a highly advanced technological product with tantamount services), need for increased profitability (since turnover is high and operating costs are also on increase) and technical aspects regarding digital video recording and its marketing in the context of United States of America.

External factors: External factors are related to the environment of the organization. There should be clear feasibility among external factors to smoothen the functions of the organization. One of the big challenges of the firm is to understand the barriers of the organizational functions among external factors and build strategies to overcome the problems.

Determine what additional information is needed but not present in the Case to develop a complete picture. The additional information needed is in terms of competitors’ profiles, turnover, operating income, and market shares. Besides, it is also necessary to have data on how TiVo’s business impacts the competitors’ performance and vice versa.

Remote environment

Economic factors: If the economic situation of the firm is feasible, it will lead to the development of the firm. There are lots of economic factors: Credit availability leads to mobilize the finance functions of the organization. It will be helpful to increase the investment of the firm. The efficiency of financial management leads to increase disposable income through effective decisions. Inflation affects the performance of the firm. If inflation increases it leads to an increase in the cost of production. Raw material cost, salary, product pricing, etc would be influenced by inflation. If the GDP rate increases it indicates the development of the country, that is, the income level of the people will increase which will lead to an increase in purchasing decisions of the people.

Social factors: The social attitude of the society leads to purchasing decisions of the consumers. If the firm’s activities are against the beliefs or ethics, its sales will be decline. Values can increase through increasing quality and public relations. There are mainly three classes of people in society – upper class, middle class, and lower class.

Upper-class people will like to purchase costly products. If the majority of the people belong to the upper-class level, it will enhance the sale of TiVo’s products, since these products are basically high-priced. The political attitude of the government affects profit maximization of the firm, e.g. taxation.

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Industry environment

Industry environment is the environment in which all the competitors are involved in the production of the same product. As far as a new entrant in the market is concerned, it has to face a huge competitive advantage which will be helpful to capture the market easily.

Tivo’s developed disruptive technology

Digital video recorder (DVR) is mainly located in four industries. Broadcasting and TV, software and programming, Electronic instrument and communication equipment. (Hoffman, Halim, Son, & Wong, n.d.). TiVo has to face a lot of competitors. It reduces competition through alliances and patent policy, but they face competition from cable, satellite, and electronic companies. It developed its own DVR and sells it while other companies give these on rental or even free.

Operating environment

TiVo’s product focuses on the field of entertainment electronics. To deliver quality products, TiVo was pioneered by Mick Ramsay and Jim Barton. It has been possible for TiVo to deliver advanced software technology products. TiVo managed collaboration with other electronic manufacturers to expand its business at the appropriate time.

TiVo’s products are affordable to all categories of people. This is because it is in the entertainment field. Digitalized video receiver is capable of providing relaxation to people in their busy life. As TiVo implemented advanced technology and quality within the products, they are costly compared to competitors’ products. TiVo recruited efficient permanent employees in order to increase efficiency. Earlier, the firm recruited people on contract basis.

Internal Factors

SWOT Analysis

Strengths:

  • Collaboration with large players according to the situations
  • Good brand image among public
  • Loyal customers
  • Few suppliers: it helps to control the overall distribution activities
  • Good technology within the product
  • Availability of resources
  • User friendly
  • Different facility in usage
  • Innovative advertisement methodology

Weaknesses:

  • Lack of adequate board members
  • It caused lack of qualitative decision making
  • Disruptive technology
  • It feels difficulty in marketing
  • Lack of qualitative employees earlier
  • Cost of the product

Opportunities:

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  • Innovative idea
  • It creates hopes to grow
  • Good technology comparing to competitors
  • Possible substitutes
  • Manufacturing partners: it helped expansion of business
  • International market opportunity
  • Good marketing channel

Threats:

  • Comparatively low price of competitors’ products
  • Growth of competitors
  • Governmental controls over this industry
  • Substitutes or alternative products

Resource based view of the firm (RBV)

It is a method of internal analysis of the organization. According to this, analyzing is done of the assets (both tangible and intangible), skills, capabilities, and core competencies of the organization. Finance is one of the core parts of the organization. Finance is interrelated with all activities of the organization. TiVo has strong finance support. In 2000, AOL invested $200million in TiVo and became the largest shareholder of the company. AOL was service partner of TiVo NBC and AT&T made partnership for promotion and marketing respectively. TiVo has strong technological advantage.

Pioneered by Mike Ramsay and Jim Barton, TiVo started to develop technologically advanced products. TiVo developed strategic planning according to the changing situations. TiVo used the services of electronic manufacturing companies for the production of Hardware. TiVo solely designed hardware and manufactured with the help of Philips, Sony, Huges etc. “TiVo manufactures their own branded unit, called the TiVo Series2 (40 and 80-hour).” (Replay TV vs. Tivo, n.d., Tivo models, para.1).

TiVo has few efficient suppliers. It helped to control distribution rather than decentralization. Besides, TiVo has good brand image and loyal customers. Good brand image helped TiVo to increase its uniqueness within the market. At first, TiVo had contract based employees. TiVo changed the strategy according to the situation and recruited quality oriented permanent employees. TiVo has core competencies in the technological advantage. TiVo has efficient Technology resources. This aids TiVo in its business prospects.

Value chain analysis

Value chain analysis is helpful to create efficiency of the organization. There are mainly three activities in the organization performance – input, process and output. Input refers to raw materials, manpower, machines etc. Process is in between input and output. Process is helpful to convert input into output. It enables to provide quality oriented output according to the need of the customer at lower cost. Actually, it is reengineering all the activities between input and output.

TiVo has good market research team and it undertakes different activities in order to understand the actual customer needs. TiVo recruited qualified employees and ventured with different competitors in the process activity. TiVo delivered quality products according to the need of the people.

Assumptions

TiVo pioneered with two brands for the purpose of development of the first commercially available digital video receiver (DVR). Geographical area of TiVo is mainly based on destinations within the United States. The prices of TiVo products are a little bit high comparing to the products of other competitors, because TiVo implemented state-of-the-art technology within the product. TiVo implemented the patent system for the purpose of uniqueness of its products.

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Main issues facing the company currently

The main issues before the management in the current context is first in terms of the fact that DirecTV, one of the main service providers for TiVo, and the provider responsible for gaining around 4.4M subscribers for this company, is not willing to renew the present contract beyond 2007. (Hoffman, Halim, Son, & Wong, n.d.).Thus, after 2007, this company would need to seek out other service providers, as partners. The second is in terms of cost. It is seen that the price of HD TiVo is higher than that of others, and again, users may need to think twice about investments in TiVo especially when other rivals are offering DVR service free.

The impact of satellite and cable operators on TiVo’s business is also of importance. Since cable operators offer to provide on hire DVR rentals at just $13.44/month, those segment of the population who cannot or do not wish to purchase DVR could find this a better and more economical choice. In the case of TiVo, it is seen that those who wish to acquire TiVo need first to subscribe to it, by making an upfront fee and then also need to pay fees to cable operators for getting the system operated. Thus, the total cost for the ultimate user would be higher. Besides, there are quite a few providers who provide the service free of cost; only equipment costs need to be paid. With the entry of a large number of competitors into this field, it is seen that scope of activity would rise in coming years, given the fact that most customers and end users are comfortable in dealing with this technology. Moreover, it is also seen that with time, the price of equipment might come down, and more and more people would be able to afford a Digital Video Recorder. “TiVo CEO Tom Rogers said yesterday that the company hopes to soon offer a lower-priced HD DVR. “ (Swann, 2007, Washington, D.C, para.1). Perhaps, in a franchisee system, and joint ventures between providers, cable and satellite operators, greater efficiencies could be rendered, which could provide a boon for the industry as such.

Coming to the next aspect, it is seen that pricing and servicing are major issues that need to be addressed. Also, a well co-ordinated demographic dispersion in the United States where it is presently concentrating is overdue, considering that leadership in this field would also mean staying very much ahead of the competition in terms of other players, cable and satellite operators who are providing these services at cheaper rates and enhanced services. Thus, the main thrust would be in terms of developing suitable and appropriate marketing strategies and ideas that could create more customers and build more business, not only in the United States, where perhaps the market may saturate within a few years, but also in terms of a global approach to marketing DVR systems.”TiVo has developed several new applications and services using HME, including TiVoCast and SwivelSearch.” (Welcome, 2005, For TiVo subscribers, para.1).

“The TiVo service gives you ultimate control over your TV viewing by keeping track of the latest TV schedule and automatically recording every episode of your favorite shows, even if the day or time they air changes. All you do is, find the show you want by searching or browsing the TV listings, and then specify whether you want to record an individual episode, or get all episodes of a show (with or without repeats!).” (TiVo DVR features, 2009, Catch every episode, para.1). It is now necessary to consider the next aspect of this TiVo case study in terms of entering into strategic partnerships in order to consolidate its position in the entertainment electronic industry. This could be evident in the agreement signed between the cable box dealer, Comcast and TiVo. “The companies announced the agreement on Tuesday, saying they’re working to make TiVo’s DVR service and interactive advertising capability available over Comcast’s cable network. The first of their co-developed products will be available in mid- to late-2006 and will use the TiVo brand.” (Shim, 2005, TiVo, Comcast reach DVR deal, para.1).

Again, one of the main issues that the Company now needs to address is that of its patents, issued patency rights and pending applications. It is believed that patency infringement suits are a major issue in this company. Apparently, EchoStar had to shell out “$104 Million” in terms of lawsuit compensation for alleged patency infringement. Although EchoStar has decided to move an appeal to higher courts, it is believed that no major upturn in its favor would inure. (Echostar to pay TiVo another $103 million in patent case, 2009). Again, during 2006, “TiVo, a pioneer of digital-video recording services, won a 2006 trial that Dish infringed its patent, and the verdict was upheld on appeal.” (McQuillen, 2009, Dish asks appeal court to allow recording- service use (Updater 2), para.3).

What issues impact the ability of company to meet its goals or solve the case problems?

Perhaps the main issue could be in terms of having strong dealership networks and customer contacts that could be enforced to increase revenues in the marketing of DVR. In the context of this company, it is seen that not much revenue could accrue through advertising networks, since one of the objectives of DVR is in terms of avoiding advertisements or commercial broadcasts during programs. It could also be in terms of protecting its patency and designs against infringement by other unscrupulous businessmen. It could also be seen that its strategic partnerships with satellite and cable operators also need to be reinforced and renewed over time, in order to gain synergistic advantages.

Strategy of business : It is seen that the present strategy needs to provide for the increasing role played by cable and satellite operators who are in better position to bargain with customers. Comcast, a cable box operator could make inroads into TiVo’s business segments, and therefore, the strategic alliance between Concast and TiVo is indeed welcome. “A deal between the digital video recording pioneer and Comcast suddenly has investors very interested in shares of TiVo. TiVo made news last week with a poor earnings report and disappointing expectations for 2006, and according to analysts seemed to be in major trouble. The Comcast deal was more than enough to turn the tide however, and shares of TiVo were up more than 50 percent in early morning trading Tuesday.” (Investor guide stock of the day, 2005, TiVo soars on deal with Comcast, para.1). Thus, the strategy needs to be that threat of competition could be overcome through tactical alliances and partnerships so that this company could maintain its number one spot in the market.

Interrelationships of the major players in the Case?

TiVo are the manufacturers of Digital Video Recorders while Comcast are cable box providers. There are other cable operators and satellite TV operators who have market share in this business. Besides, AOL provides support to TiVo in terms of service provision, etc. “DirecTV TiVos and DirecTV HD TiVos will continue to function for an indefinite period but DirecTV HD TiVos will not be able to receive the HDTV programming DirecTV intends to roll out through 2006 and 2007, specifically local channels over satellite.“ (Feldon, 2006, What is the future of the DirecTV HD TiVo, para.2).

What is the central problem in the Case?

TiVo must develop marketing strategy to reach more customers around the globe, differentiate itself from the competitors and develop its product to maintain its leadership with its innovative technology.

Identify courses of action to solve the problem: The main course of action would be to first find out deficiencies in present marketing system and find out ways and means by which these issues could be suitably addressed to reduce, if not eliminate, their impact on the marketing of the business. Further, the threats posed by various rivals need to be fully identified and assessed, including external threats like hacking, patent protection, customer privacy and related issues. If and when necessary, corporate attorneys need to be taken into confidence in these issues and their opinions heard and advice executed. The pending and ongoing lawsuits also need to be monitored closely and their outcomes enforced. Moreover, company policies and procedures need to be enforced with regard to all aspects of business to meet any exigencies or emergency situations.

Are there any specialized skills needed to solve the problems identified in the Case?

A strong marketing background, especially of the kind needed in entertainment electronic industry, with computer skills is necessary. Besides troubleshooting skills, there is need for people dealing in these areas to have strong, dynamic communication and negotiation skills to deal with different vendors, clients and governmental agencies.

What will happen if these alternative solutions are not met?

Although DVR is a growing dynamic business, there are challenges and risks at every step, for one thing, the turf has new entrants coming regularly, increasing the competitive elements in this game, and for another, technical obsolescence of products is a reality, with newer and most innovative gadgets gaining prominence and visibility. Therefore, TiVo needs to keep abreast of state-of- the-art, especially what is transpiring in DVR field in other advanced nations like China, Taiwan, Japan and the US. In this market, customers are always seeking something more innovative, convenient and pleasurable, not only in terms of viewing on demand, but also in terms of the package value of these products and servicing. High definition TV with enhanced picture clarity, surround sound, sharper images and other exceptional sound is now a major trend, and TiVo has also incorporated these outstanding features. (Swann, 2007).

Reference

Echostar to pay TiVo another $103 million in patent case. (2009). Paid content.org. Web.

Feldon (Ed.). (2006). HD TiVo and HD DirecTV TiVo FAQ: What is the future of the direct TV HD TiVo?. Community Forum. Web.

Hoffman, A N., Halim, R., Son, R., & Wong, S. (n.d.). Case 48: TiVo, Inc, TiVo vs. cable and satellite DVR: can TiVo survive.

Investor guide stock of the day: TiVo soars on deal with Comcast. (2005). Investor Guide.com. Web.

McQuillen, W. (2009). Dish asks appeal court to allow recording- service use (Updater 2). BloomBerg.com. Web.

Replay TV vs. TiVo: Introduction: TiVo models. (n.d.). Web.

Shim, R. (2005). “TiVo, Comcast reach DVR deal”. Cnet News. Web.

Swann, P. (2007). TiVo eyes lower HD DVR price. TVPredictions.com. Web.

Swann, P. (2007). TiVo eyes lower HD DVR price: Washington, D.C. TVPredictions.com. Web.

TiVo DVR features: Catch every episode. (2009).Tivo. Web.

Welcome: For TiVo subscribers. (2005). TiVo: HME Software Development Kit. Web. 

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