Case Study: VIACOM EMPIRE

Strengths:Exploring current company's situation on the market, one could easily notice the biggest strength of the conglomerate of this type is the imitation by competitors. Other companies in the industry such as Cox Enterprises, Gannett Company, as well as News Corporation follow about the same way that Viacom does. This might be considered an epoch business trend, but when the company is the rival #2 in the United States, this is a strong reason to be learned from.

Secondly, the company is producing a product that still didn't achieve its level of maturity in the normal product life cycle. Media production is on its peak now, which will last for long time. This product's cycle is very unusual and needs its own chart. It will take a long time till media production starts declining.

Third, the status of conglomerate allows the company to use resources of its daughter company's, but not from subcontractors, which saves large sums of money. This works a big media holding: to make a successful movie, the company will need a studio to film, channels to show and inform, internet to inform, media to criticize, music record company to promote a soundtrack and its huge marketing department to promote the movie on the market and in other countries.

Forth, the company possesses great resources that allow even bigger growth and take a strong back up of any other projects in the future. This asset characterizes company's prospective for the nearest future and puts a green light on for any other bank loans.      

                And lastly, transnational media corporations have become a dominant force in the production, sale, and distribution of the media products on international arena. "Historically, the United States has been the international market leader in television and film exports, having developed a highly sophisticated worldwide distribution network. In 1998, the seven leading international film exporters were U.S.-based companies (including Sony USA), accounting for 85% of worldwide box office sales" .

Weaknesses: At the meantime, the company has a number of weaknesses, which makes the game harder, but more interesting. The first and most important weakness is the size of the conglomerate. It is impossible for one person to control such giant organization, when the market of each inner organization is changing and every segment has it's own issues to be solved. This was the reason for 2005 company split, when conglomerate had not reason for existence any more.

 Secondly, there are twenty other players on the market, which are trying to grow and get leadership position. This creates a very wild environment, where as media world is already fast enough. In this case, it needs even greater speed, when being a number 2 company in the United States. The completion is probably a threat to the company, but ability to fight this competition is the company's weakness. Money is not the case at this point, but rather creativity and ability to move fast. 

Third, as bibber the company grows, the more chances it has to become a monopolist in the industry. At least this was the case with News Corporation a decade ago, when it started buying all small media companies in the country and all over the world. Thus, the weakness in that the company can't move further a certain point, otherwise it will have to go through monopoly blame procedure.    

Forth, media industry is a target for many court procedures, when common citizens decide that certain action or information issued is assaulting. Thus, they demand a compensation for moral harm. The size of the appeals is different, but many times it can be quite exhausting for the company. 

Fifth, the industry needs a constant investment in the development, thus if some wing of the conglomerate does not receive a decent financial support of the development, it could be bitten by the competitor, which can drag down the entire company.

Opportunities: Seeing all strengths and weaknesses, the company can estimate its opportunities, which are enormous at the current stage. The biggest opportunity is developing a worldwide strategy, which implies saturating new markets and acquiring new companies worldwide. "Viacom stands to offer the host country significant opportunities for economic development in terms of potential jobs, technology transfer, and tax revenues" (Greshon, 2000).

                Second, the intensive growth of world's dependence on communication technologies opens many doors for the company to grow up along with growing wide. Radio, television, publishing and internet are not the last means of communication. There will be plenty more invented. The most wildly developing mean nowadays is mobile industry.

                Third, marketing sector develops new money building strategies, where media and movie production play the key role. For example, hidden movie advertisement (Brad Pitt smokes Marlboro in Ford, driving to McDonalds for lunch). These three companies can pay the price for the movie production thus cutting most of Viacom's expenses.   

                Forth, conglomerate implies not only one field dominance. Viacom can afford now to spread its business to banking, airline industry, or any other that still has some marketing niche to be filled. 

                Fifth, America is a capitalist country, which system is unlikely to change within the next 100 years, but the world economic systems tend to change in the favor of capitalism, which allows the company to have a safer path toward the international growth.

Threats: When talking about decision to invest in a foreign country, it poses serious risks to the company operating abroad. It is important to know that any transnational company is a subject to the laws and regulations of the hosting country. It is very important to learn host country's politics and business environment before entering the market, as it can be crucial for the business.

Second, a corporation is always concerned with the intensity of the competition within the industry. The level of intensity depends on five different competitive forces: a. the threat of the new entrants, b. the bargaining power of company's customers c. the bargaining power of a firm's suppliers, d. the threat of substitute products, and e. the intensive game of cometetive rivals. As Porter notes, "the collective strength of these forces determines the ultimate profit potential in the industry" (Greshon, 2000).

                Third, the market has a larger choice of entertainment than before, making in tough to impress the consumer. These choices are: cable and direct broadcast satellite television, videotape rental, video games, CD music, and the Internet. "One direct consequence is a fragmentation in consumer demand for various kinds of media products and services. As an example, the major television networks and program producers are finding it increasingly difficult to sustain the economies of scale normally associated with mass entertainment production" (Greshon, 2000).

                Forth, continuing the international topic, in response to attained U.S. trade dominance, many countries in the world (European Community the most) have created a variety of trade barriers in order to limit the import of U.S. media products.

                Fifth, spreading to the world community will increase the company's size even more, making weakness point of the conglomerate more vivid and harmful. 

Companies previous Strategies

Previously the company had a clear growth strategy that described the company's upword grows and development. Viacom developed under a mergers and acquisitions strategy that according to which it achieves complementary strengths by combining corporate assets. The strategy started to implement back in 1985 when Viacom bought Warner-Amex Satellite Entertainment, a 2/3 interest in MTV Networks, a 1/2 interest in the premium cable programs Showtime and The Movie Channel. Later in 1999, Viacom proposed $37 billion for CBS.

During its growth period, Viacom used the vertical integration strategy, through which Viacom has increased financial interest in broadcast and cable television, radio, film production, the Internet, book publishing, and distribution. "In 2005, Viacom remains the third largest communications conglomerate in the world with more than 122,000 employees and annual revenues of $26.6 billion" (Greshon, 2000).

 There is also so called competitive business strategy that examines how the company wants to position its service within the specifics of the marketplace. When penetrating the market deeper, it is inevitable to have this strategy included in the big picture of company's growth.

Vertical Integration and mergers and acquisitions are the expected strategy for any large media holding as this one. But back then the business world didn't imply such market situation as we have today. That is why the development was natural and logical, which brought the company and the industry where it is today. Capitalistic world allowed the free trade of companies and various trade experiments which projected big money. Some of the project were over estimated (when in 2000 Viacom Inc. bought the CBS television network to his movie studio, theme parks and Blockbuster video stores), some were very productive (the beginning in 1980-1990s).