Introduction
Yahoo Inc. is a technology company, which came into existence in 1995. The company provides global digital content and experiences through various forms of technological products accessed via a wide range of devices, such as mobile phones, desktop computers, laptops, and tablets. Yahoo Inc. offers various online services and properties to users and distributes the networks of its affiliates or third parties, which in turn advertise the company’s products and offerings by integrating Yahoo! Inc. on their websites (Yahoo, 2015). Yahoo Inc. mainly generates its income by placing adverts on its website or providing search engines that allow users to search through the Yahoo! Inc. portal. The company offers various products that include Digital magazines such as Yahoo Entertainment and Lifestyle, Yahoo News, Yahoo Search, and Yahoo Answers.
It also offers various communications platforms such as the Yahoo Messenger, Yahoo Mail, and Yahoo Groups. Moreover, Yahoo Inc. offers Tumblr, which provides mobile applications and web service, and Flickr for the management photos on the mobile or web platform (Yahoo, 2015). Yahoo Inc. also provides video content distribution and advertising through the Yahoo Bing Network that builds a network between advertisers and the users or potential clients. Therefore, this essay analyses Yahoo as a technology company by examining the market environment, nature of products, competition, price elasticity of demand, income elasticity, and SWOT analysis with a view of positioning its competitiveness in the global markets.
Company Profile
Yahoo! Inc., co-founded by Jerry Yang and David Filo, both of whom were PhD students at Stanford University, is a global provider of web portal services with a very large web presence. In April 1996, the company first went public on the NASDAQ (YHOO) with the stocks opening at $ 13.00 and closing at $33.00 (Shareholder, 2012). The company joined the S&P 500 index in December 1999 and continued to receive great reviews and a good profit margin (Yahoo, 2015).
However, in 2012, the company downsized its labour force by 14% in a bid to cut down on recurrent expenditure and increase its profit margins. Yahoo! Inc. is passionate about connecting people on a global scale, expanding the world’s knowledge base and the provision of a customised digital experience to its customers. It also aims to provide a distinctive way of advertising and to help entrepreneurs worldwide in building their business. Yahoo! Inc. strives to connect people with their passion such as music, entertainment, sports, and so on through creative innovations. Yahoo Inc. has a user-friendly environment, thus creating an impeccable opportunity for the company to generate income through advertising for companies in various sectors (Liedtke, 2012).
Yahoo! Inc. focuses on excellence, innovation, customer satisfaction, teamwork, community ad fun. The company outlines its major stakeholders as the capital investors, its employees, customers and the advertisers that market their products on the web portal. In this regard, Yahoo! Inc. continuously strives to develop strategies that will raise the company’s profit margins, maximise the shareholder value, and satisfy their customers in diverse markets globally.
An Oligopoly Market Environment
Yahoo! Inc. typically operates in an oligopoly market environment. The major competitors that include Google, Yahoo, and MSN, have managed to gain a significant amount of market share, creating an oligopoly in the web portal industry. According to Jones (2007), oligopoly market comprises a market where major players dominate and dictate its trends in terms of products and services. A significantly high barrier of entry also characterises such a market. Notably, other web portal and technology companies, namely, Google, and MSN, offer similar services as Yahoo Inc. Specifically, they all offer services such as emails, instant messengers, advertising, and search engines. The difference lies in the technology used and the marketing strategies. In most instances, big companies merge their products and work together to clinch a high level of industry revenue.
Horizontal integration or outsourcing enables companies to minimise the costs of production and maximise profits. For example, for a long time, Yahoo! Inc. used Google’s search technology to power its own search tasks. Indeed, the world over, many users often speak of a limited number of search engine tools or communicators that they use. Evidently, many people speak of Yahoo, Google, and MSN as their primary sources of news, communication, and search portals, yet there are many other companies operating in the market. The dominance of Yahoo, Google, and MSN apparent sheds light as to how the industry is under the control of the “Big” few companies. In this regard, the big players may determine pricing in such a market as they vigorously compete with each other to safeguard their client and user base.
Price Elasticity of Demand
Analysis of Yahoo! Inc. shows that its price elasticity of demand is elastic. The price elasticity is the ability of the price to influence demand because normally prices and demand have a negative correlation. Yahoo! Inc. emerged as a big player in the web portal industry back in 1995. However, various other players have emerged in the market offering similar products. The emergence of new players means that advertisers got a wide range of other service providers to choose. Other companies like Google have superseded Yahoo! Inc., and thus, it no longer commands the biggest user base in the industry has it used to do. Therefore, the company must ensure that its pricing policy is efficient and the best in the market. Advertisers affiliated with Yahoo! Inc. will access services from other service providers when unjustifiable changes in the prices of products occur.
Consequently, the brand value of Yahoo Inc. has affected the elasticity of the demand for its products. Customer perception of the brand is very important as it accords a company with its worth. A company that successfully manages to create a good brand will be able to adjust its prices without causing a negative ripple effect on the demand of its pricing. For example, high-end brands can adjust their prices on a larger scale and continue to enjoy a high-profit margin. Nonetheless, Yahoo Failed to brand itself in the market, thereby making the price elasticity of demand for its products elastic
Income Elasticity of the Products
The kind of income elasticity of that Yahoo Inc. commands is a high demand elasticity of its products. McEachern (2012) defines demand elasticity as the ability of demand to change in response to market forces. The income elasticity of demand indicates how the changes in income affect the quantity of demand. Yahoo’s products command positive income elasticity, which means that the demand for the product is directly proportional to the income. Therefore, the demand for Yahoo products will increase with an increase in income and will drop when the income of the consumers drop. For example, a company will not advertise on Yahoo, or any other web portal company for that matter, if its marketing budget is low. On the other hand, companies will spend more on advertisements when they have more money to spend on their advertisements. The advancement of technology and improving economies have enhanced purchasing power of the people in that they can afford to buy computers, smartphones, and tables, which are essential devices in the consumption of Yahoo’s products.
Competitors in the Market
Yahoo Inc. works with the sector of providing internet products and services, and the online content market. This is a highly competitive market with the biggest competitors being Google, DoubleClick, Ad Exchange, Microsoft, and AOL. This industry experiences rapid changes in regards to both technological advances and user needs and requirements, and competition increases at a very large scale (Shareholder, 2011).
The nature of the industry, characterised by revenue generation through advertising, requires a high level of a user base to ensure a sufficient level of income or revenue. This is because advertisers will often target companies with a high number of users on daily, monthly, and yearly scales. As such, the web portal industry, in which Yahoo Inc. operates in, has a high degree of rivalry amongst the players, who fiercely compete with each other through product innovation, advanced technology and good pricing in a bid to create product and company differentiation to guarantee competitive advantage. The web portal industry has reached its optimal stage in various markets such as Europe and America, but a lot more can be done in other emerging markets in Asia, South America, and Africa.
Notably, the dynamism of the Internet allows for a relatively easy way for new companies to emerge in the market. However, the web portal industry requires a significantly high amount of capital, innovation, and technical knowledge to compete with other players in the market. Thus, this has made it easy for a company like Yahoo Inc. to thrive in the market, as the threat of new entrants is relatively low. Like most of its competitors, Yahoo Inc. does not charge any fees for many of its products such as the communicators like Yahoo Mail and Yahoo Messenger. This reduces the rate of users switching from one competitor to the other, thereby allowing Yahoo Inc. to maintain its user base. Consequently, the supplier power is for Yahoo search engine and other products are quite low since the online content required for the search engine is freely available on the Internet.
Substitutes and Complements in the Market
Yahoo Inc. operates in the web portal industry that does not have many substitutes. It is possible to say that Yahoo Inc. product substitutes may include other conventional services such as the postal service and newspapers. However, considering the technological advances of the modern age, such facilities are inefficient and outdated. Therefore, there are no real substitutes for what Yahoo offers concerning user needs and advances of the modern age. Therefore, Yahoo generally faces a low level of threat from potential substitutes. In contrast, various complements have emerged in the market in the form of high-speed mobile internet and smartphone technology. Such technologies allow users to gain access to the Internet at any time and from any point. However, Yahoo Inc. has been able to tap into this emerging trend by creating suitable products to boost its revenue gain and attain a high level of customer satisfaction.
Yahoo Product Demand
Undoubtedly, Yahoo products are on high demand in global markets. Yahoo is one of the biggest service providers for integrated online network services. It commands an integrated user base of more than five hundred million and provides these users with a wide range of network-oriented services. Notably, the World Wide Web has tremendously grown over the last couple of decades, with more people utilising its features and advantages.
Yahoo products include communicators, advertising, search engine, and digital magazines. Users have become tech-savvy, thus leading to a high demand in communicators as provided by Yahoo. All these are products and services sought after by people from all sectors, industries, and levels. These include students, government employees and other professionals. Digital technology is associated with speed and efficiency, thereby leading to high demand for the products offered by Yahoo. Nonetheless, since its inception, various other companies offering similar products have emerged in the market, thereby creating a high level of rivalry and competition in the market. Yahoo is now trying to surface despite the fact that it is offering essential products and services to a high number of clientele. This, however, does not mean that the products are not in demand, but only reflects on the nature of user needs and requirements. Jones (2007) holds that Yahoo must continuously produce innovative products and services way ahead of its competitors for it to maintain its market share.
Labour Force
The web portal industry faces rapid changes on a daily basis. Technological advances occur on a continuous basis with innovations arising on a daily basis. The rapid changes, perhaps, is the greatest challenge for any technology company. In addition, the user needs change from time to time, as users require more services and products on a continuous basis. As a result, the labour force must be knowledgeable, dynamic, and willing to adapt to user needs. Apart from having the technological skills of creating innovative products, web portal companies like Yahoo Inc., must also have a highly skilled labour force to handle marketing, sales, and customer retention. This requires frequent and rapid skills training and the acquisition of top-notch employees, who are able to get the job done. An efficient labour force will be able to relate the passion of the company into their daily tasks thereby contributing to revenue generation and profitability.
Profitability of Yahoo
Since its inception in 1995, Yahoo has experienced immense challenges in the technology industry. The company managed to attain a high level of revenue collection in its maiden years. However, Yahoo is currently having problems in maintaining a significant level of revenue growth. As a result, Yahoo has not seen any major growth in its revenue, but has experienced a fall in its operating profitability due to a high level of non-recurring expenses. In the recent past, Yahoo laid off 14% of its labour force in a bid to focus on its main competencies, growth, and innovation. Yahoo needs to creatively use its assets and brand to gain ground in its offshore market share and performance. Notably, the company is embarking on major changes that will influence the company’s strategy for growth and development
SWOT Analysis
Regardless of the fact that companies like Google and Facebook have superseded Yahoo in terms of profitability and user base, it was once a huge player, which dominated the market. A SWOT analysis of Yahoo reveals that the company is indeed a major giant in the Internet marketing. For instance, Yahoo has various strengths in that it has a large user base and high revenue source obtained through ads in the main form of communicator, Yahoo Mail.
Secondly, Yahoo is an influential marketing company in the industry and among its peers well known for its larger product portfolio. However, its weaknesses are that it has a low market share of the search engine, which was a mere 6% as of January 2012. In addition, its mailing services is also experiencing a negative change as Google, its biggest competitor is attracting most of the Yahoo users. In addition, other companies like MSN and CNN are offering similar products that are attracting more users. In short, Yahoo is losing its ability to differentiate its products and maintain its share of the market.
Yahoo has a wide variety of opportunities that it can exploit in the technology market. To begin with, it has a highly structured and authenticated business directory known as the Yahoo Directory, which can be used to generate income for the company. Consequently, Yahoo can tap into its offshore markets such as the developing nations, where mobile technology is rising at a very high rate. It can also utilise the social media to generate income from social media and internet advertising for any commodity in the world. This is a major opportunity since there many users, who are deeply engrossed in social media. Yahoo can easily integrate its products and services with the social media platform. Finally, Yahoo can exploit on the diversification of its business various business sectors on the World Wide Web to create new opportunities for revenue growth.
Yahoo faces a big threat from other competitors in the market such as Google, MSN, and Facebook, which highly affect the company’s revenue generation strategies and the user base. Google’s presence alone in the search engine services poses a great threat to Yahoo. In addition, Yahoo is faces major cultural barriers and challenges when trying to penetrate offshore and foreign markets. Consequently, emerging entrepreneurs pose a big challenge to the company as they produce innovative products that compete with the internet giant. Lastly, Yahoo once dominated the advertising market but it now faces major threats from social networking sites like Myspace and Facebook, which command a huge following.
Conclusion
Without a doubt, the World Wide Web is a dynamic platform that has tremendously grown over the last two decades or so. Yahoo Inc. was a major contender in the market with a huge market share upon its inception, but it is slowly losing its balance due to the dynamism of the market and industry. Currently, the Internet has seen the rise of users logging in to the World Wide Web, and thus, the market share is quite large for all. Some major players have taken the bigger share of the pie.
Yahoo Inc. is an example of a web portal company that offers various network-oriented online services to consumers. It operates in an oligopoly environment characterised by a small number of big firms and commands an elastic price demand and positive price elasticity. Yahoo Inc. has been facing major competition from its rivals and is struggling to stay afloat. Nonetheless, it is still a major contender in the market and, through strategic planning and innovation, can regain its impeccable profit margins.
References
Jones, R. (2007). Yahoo: Strategic Management an Integrated Approach. Boston, NY: Houghton Mifflin Company. Web.
Liedtke, M. (2012). Yahoo to lay off 2,000 employees. Spartanburg Herald – Journal. Web.
McEachern, W. A. (2010). Economics: A Cotemporary Introduction. Ohio: Cengage Learning. Web.
Yahoo: About Us. (2015). Web.
Shareholder: Yahoo 10k Annual Report. (2012). Web.