Chapter 9
Strategy and Competition of Global Media Conglomerates
Just as in theoil and automotive industries earlier this century, themedia in- dustry has gone through a profound transformation, progressing from a primarily national to a global commercial-media market, and in the process created a group of media conglomerates with worldwide reach (McChesney, 1999). The move toward an international business of media products corre- sponds to the shift away from nationalistic economic policies toward the in- ternationally free-market economy of post–World War II facilitated by the establishment of international agencies like the World Bank and the Interna- tional Monetary Fund (Gershon, 1997). Some have asserted that the inter- nationalization of media is intractable and irreversible as managers increasingly view the expansion of media in a global context and not neces- sarily with an aim to fulfill the cultural needs of specific audiences (Smith, 1991). In fact, the trend toward media conglomeration has generated heated debates among communication scholars, policymakers, and industry prac- titioners (Croteau & Hoynes, 2001; C. Davis & Craft, 2000; S. Davis, 1999; Demers, 1999; Teinowitz, 2001). Drawing from a social/public-sphere the- ory, opponents have called such an acceleration of consolidation the homog- enization of media and a threat to democracy (Parker, 2000; Smith, 1991; Wellstone, 2000). Proponents of the development, coming mostly from an economic/market perspective, have argued that the advent of technologies and proliferation of media outlets would minimize the threat of monopoly power and that economies of scale/scope are necessary when a firm com- petes in a global marketplace (Mandel-Campbell, 1998; Shearer, 2000).
Considering the significant role media corporations play in the pro- duction of culture and the delivery of important news and information and the fact that corporate structure, strategy, management, and be- havior ultimately impact the nature and supply of “content” (Hollifield,
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2001), a better understanding of the competitive patterns, international business strategies of media firms, and determinants of these strategies would contribute to the body of knowledge about the potential effects of media globalization and transnational/global media management.
This chapter contains two general sections: (a) a review of the world me- dia landscape from the perspectives of the degree of media multiplicity, dif- fusion, openness, and new-media potential along with an investigation of how various environmental factors—including economic, cultural, social, political, technological, and other supporting industrial characteristics—in- fluence the media markets in these countries and (b) an examination of the diversification patterns of the leading global media conglomerates along with discussions of the factors that affect media firms’ strategic choices re- garding international business in this sector and the relationship between di- versification and performance. Whereas the macrolevel, general overview of the world’s media systems provides an assessment of today’s market envi- ronment, the microlevel, firm-specific analysis of diversification strategies offers insight into how global media conglomerates have responded to the market forces and the consequences of their strategic actions.
INTERNATIONAL BUSINESS AND GLOBAL MEDIA CONGLOMERATES
Before we dive into the discussions of a global media marketplace and global media conglomerates (i.e., media firms that have overseas opera- tions in multiple countries), it is essential for us first to be familiar with various relevant terms used in the international business (IB) discipline. Though transnational corporations (TNCs), multinational corporations (MNCs), and multinational enterprises (MNEs) are used interchange- ably in many literatures, they are sometimes referred to as companies of different operational philosophies concerning overseas operations. For instance, MNC and MNE are often used to describe either a company that takes a global approach to foreign markets and production, inte- grates operations that are located in different countries, and develops capabilities with an eye toward diffusing them throughout the com- pany’s home countries or a multidomestic company that allows each of its foreign-country operations to act relatively independently. TNC, on the other hand, is frequently used to describe a company that leverages the capabilities of both home and foreign countries where it operates and might have a geographically dispersed power structure (Daniels & Radebaugh, 1998). Although these distinctions are important in denot- ing the degree of international control and strategic emphasis for a me- dia firm, in the context of this study, the terms global, multinational, transnational, and multidomestic are used interchangeably because it is not the objective of this chapter to investigate the comparative merit of different international corporate structures but to assess generally the patterns of operations of media firms with overseas operations. Thus,
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global media conglomerates are defined here as media firms that operate in multiple media sectors and multiple countries concurrently. Accord- ingly, a study of global media conglomerates involves the examination of IB practices of diversified media firms in a global marketplace.
Why do companies engage in IB? Four operating objectives are said to influence such strategy: to expand sales, to acquire resources, to diversify sources of sales and supplies, and to minimize competitive risk (Daniels & Radebaugh, 2003). In reality, there is an evolution of strategy in this inter- national expansion process. Rarely is a media company conceived to be a global media giant. It is more likely that different firms evolve over time with different levels of international ambition and capabilities, which in- fluence the most advantageous strategic alternatives available to the firms. CNN was launched in 1980 as a U.S.-based 24-hour cable news network, but it is now available in many countries around the globe and a part of the world’s biggest media conglomerate, Time Warner. On the other hand, Knight-Ridder, established in 1974, remains largely a newspaper firm that focuses on domestic print and online operations. Figure 9.1 illustrates the typical patterns of international expansion with varying degrees of IB ag-
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FIG. 9.1. Patterns of global expansion for media firms. Source: Daniels, John D. & Radebaugh, Lee H., International Business Environments and Operations, 8th ed. © 1998. Adapted by permission of Pearson Education, Inc., Upper Saddle River, NJ.
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gressiveness and corporate control, different modes of operation and ex- pansion, and various extents of geographic diversification. Note that not all media firms follow the order of progression in the figure. Whereas global media conglomerates like Time Warner and News Corp. have diver- sified extensively utilizing all modes of expansion, Viacom is compara- tively much more conservative in both corporate control and international expansion. A number of factors seem to play a role in affecting these strate- gic differences. Figure 9.2 details the external and internal forces that might influence a media firm’s choice of expansion modes from exporting to foreign direct investment (FDI), functional operations from marketing to human resources management, and other strategic decisions such as market selection and control mechanisms (Daniels & Radebaugh, 2003). The external factors include forces specific to a country such as economic and regulatory conditions of a target country and the competitive envi- ronment, which dictates the potential competitive advantages available to the firm for expansion. Internal factors such as corporate objectives, core competencies, and a firm’s strategic networks also play a significant role in shaping the IB strategy of a media firm. The following section reviews some of these country-based media environments and their determinants.
THE WORLD MEDIA LANDSCAPE
It was suggested that most MNCs are formed because of (a) the uneven geographical distribution of national assets, (b) the exploitation of these assets by transferring them across national boundaries, and, more re- cently, (c) the acquisition, development, and integration of strategically important assets in other countries (Gooderham & Nordhaug, 2003). In 2003, more than 60,000 MNCs had over 800,000 affiliates abroad, gen- erating about half of the world’s industrial output and accounting for two thirds of world trade (Gooderham & Nordhaug, 2003). The media sector is no exception. There is a global disparity in supplies and access
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FIG. 9.2. Factors impacting the IB strategies of media firms.
Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-03-22 13:48:51.
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to information and media due to different country environments. For example, one fifth of the world’s people who live in countries with the highest income generated 86% of the world’s GDP, 82% of the world’s export markets, 68% of the foreign direct investments, and 74% of the world’s telephone lines, whereas the bottom fifth, in the poorest coun- tries, possessed about 1% in each sector (United Nations Development Programme, 1999).
Environmental Factors That Shape a Country’s Media Systems
In the process of examining mass media either as a social component or as an industry, researchers have identified a number of factors that might play a role in shaping media systems at the country level. They may be summarized as economic, IB, political, social/consumer, cultural, tech- nological, and other supporting determinants. These factors, individually and collectively, capture the multifaceted experiences that countries have with mass media. The following review discusses how the country-spe- cific characteristics affect the development of media markets.
Economic Factors. Studies have found that economic wealth affects a country’s adoption of new technologies (Rogers, 1995). For example, res- idents of industrial countries are 25 times more likely to have access to a daily newspaper than those in African countries, as measured by newspa- per circulation. The difference between the reach of radio and the reach of other media is much greater in developing than in industrial countries (World Bank, 2002). It was also found that general economic strength does matter in predicting the adoption of new media such as the Internet (Hargittai, 1999). In fact, the introduction of new information and com- munication technology requires a heavy investment that most developing countries can neither raise nor commit (Maherzi, 1997). Furthermore, mass-media spending by consumers and advertisers is determined by the general state of the economy. Any change in the level of the economy causes a parallel change in spending on mass media (McCombs, 1972). In essence, studies have shown that national economic factors such as income are closely related to media penetration (Islam, 2002).
International Business Factors. Although media systems had been primarily national before the 1990s, a global commercial media market had emerged by the beginning of the 21st century (McChesney, 1998). A more open economy and greater interconnectedness with the outside world are expected to drive people’s demands for more transnational media content. It was suggested that even over and above other politi- cal, economic, and geographic factors, penetration of newspapers and number of personal computers, Internet hosts, and telephone lines in- creased with more economic openness (Yang & Shanahan, 2003).
A global, open trade environment not only builds demand for transna- tional media products, but also exposes firms at various markets to com-
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Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-03-22 13:48:51.