British Sky Broadcasting Group Analysis - Case Study Example

British Sky Broadcasting Group xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Introduction British sky broadcasting group (BSkyB) is a company that deals with entertainment and home communication services. It was officially launched in year 1998; it has experienced growth and expansion to become the biggest pay television in the United Kingdom. Currently, the company has 10.5 million subscribers in Great Britain and Ireland. The company's brand name is ‘Sky Digital’ and it is transmitted from its Astra Satellites. It has a number of channels for which the subscribers and other customers subscribe. The company provides multi platform, multi channel and home communication services. In addition, the company offers and provides phone services and broadband. Its services reach audience globally through satellite partners and network of cables. It carries more than 600 audio and television channels. This report provides the company's strategic capabilities based on a SWOT analysis. In addition, the report provides a brief comment on the company in the context of the sector in which it operates. Importantly, the report discusses the company's share price performance over the last four years. Strategic Capabilities Based on the SWOT Analysis This section of the report provides a comprehensive analysis of the strengths, weaknesses, opportunities and threats facing British sky broadcasting group (BSkyB). Being a limited public company, it is faced with strengths and weakness (both internal to the company) as well as threats and opportunities (external to the company) that propel the company growth or derail it. The strengths include the strong sports contents the company presents to its customers. One of the biggest weaknesses facing the company is the geographic concentration. The company only operates and serves in Great Britain and Ireland only. With 10.5 million subscribers in these markets, the company limits itself to the geographic location of the subscribers. There is a great potential for the company for growth and subscription if it can break the geographic concentration in Great Britain and Ireland and explore other markets in other European countries, (Oliver 2012). With the growing demand for sports in Europe, the company can turn this weakness in to an opportunity by venturing in other markets as well. Though Great Britain and Ireland have big population and potential customers, the market is not as big and potential as compared to the whole of European market. This weakness limits the company to just a small growth and therefore this dictates the amount of revenues and profits the company will generate. The company should focus and aim to expand the geographical concentration in order to serve more people. Although there is stiff competition for entertainment, home concentration services and sports services, the company is well equipped with modern technology and therefore it is equally competitive. This is a good platform for mounting expansion, (Zeng & Yang 2012). One of the biggest opportunities for this company is the global online market. Recently, the company has benefited a lot from diversification and increasing the number of services to customers. The global online video market is a huge market for this company. Notably, this market is not exploited and therefore presents BSkyB Company with a huge potential. Many companies providing home communication services and sports services have not explored this market. This has been attributed to small number of customers compared to pay television and radio services that these companies provide. However, even if the market is not as big, it is well saturated with potential customers who are not only able but also loyal. To exploit the global online video market, the company has to ensure that it has the right technology and knowhow. Credibly, the company is well equipped with technological advancement and posses some of the great minds in broadcasting industry. Importantly, the global online market is composed of customers around the globe. It does not matter where a customer is; the important thing is just having access to the internet (being online at the designated time). To necessitate this, the company would hire agents all over where customers show interest in order to serve them better. The global online video market is a very good opportunity for this company, as such; the management should not hesitate to taking advantage of this opportunity, lest time gets up with the company, (Johnson et al. 2008). A number of threats face BSkyB Company. One of the biggest threats is fierce competition from competitors especially those dealing in nontraditional sources. The competitors have also acquired modern technology in their broadcasting and delivery of services to their competitors. One such big competitor is the BT Sports company also stationed in the Great Britain. This company provides similar services as BSkyB Company and hence providing direct competition. Another competitor is the ITV Company; it also provides the same services as BSkyB Company and BT Sports Company. Significantly, BSkyB Company has continued to outperform its competitors. The company's management has done a great work of combining some of its best contents as well as marketing its services. The major factor that has enabled the company to outperform its competitors is the exclusive deals it engaged to carry the major sporting events in the United Kingdom. Moreover, it acquired rights to many of the first run movies; they are becoming increasingly popular in the UK, (Kim 2005). . One of the competitive strategies that the company has adopted is reselling some of the contents it purchases to other television carriers. The company also produces its own shows. This is a means of distinguishing its products, to enhance this; the company completed and opened its own production facility in 2011. This facility has several studios some large enough to produce live events and productions. As a result, the company outperformed the competitors by increasing subscribers. The company is also selling additional services; these are high definition television, video on demand and DVRs. These services increase revenue base and increase company profitability. Another big threat facing the company is its ability to sustain and hold on to its customers and subscribers. The company is facing a big challenge of producing the best television contents in Great Britain and Ireland. Although the company has been doing impressively, the increased competition mainly from BT Company and ITV Company makes it not probable the company will keep on dominating contents as it has done in the previously, (Ghazinoory et al. 2007). BSkyB Company in the Context of the Sector it Operates BSkyB Company operates in the broadcasting industry and in the media & entertainment sector. The entertainment and media sectors in the Great Britain are expected to grow by 3.1% in the next three years from 2014. The sector has been experiencing growth trend and this is expected to continue over the next three years as indicated by KPMG. The biggest beneficiaries of the growth are companies in broadcasting, advertising and entertainment. Having control of the market and having the biggest market share, BSkyB Company will gain the most. As such, BSkyB is expected to grow as well. The company's growth in matching with the sector growth and this will only accelerates the company's growth. The price waterhouse coopers (PWC) (United Kingdom) predict and forecast the company will record growth bigger than the sector growth because of its market control and quality contents. Share Price Performance over the Last Four Years The company has been experiencing rapid growth in revenue and profitability as well. Customer’s subscription has increased considerably thereby increasing the company's earnings. The company's ability to control the market has helped it to acquire the biggest market share in the British and Ireland markets. It controls more than fifty percent (50%) of these markets in home communication services and sports services. The control of the market, strong financial base and the ever-increasing profitability has made the company shares to trade well over the last half a decade. The company is listed in the FTSE 100, FTSE All Share and FTSE 350. This year’s lowest share price was at 762GBP and was on June 7th 2013, the shares were trading 951GBP as the highest this was on October 17th 2013. The company shares have been trading at around 793.00GBRP as of December 2013. The company has a market capitalization of £12,622.97 million. This is a very strong market capitalization. It indicates that the company has many assets and it owns many assets. It has a market size of 3,000. The issue country is Great Britain. It has a price earnings ratio of £13.064, this indicates that the company generates enough revenue and profits to give as dividends and still have adequate retained earnings. Dividends payment of £30.00 and earnings of £60.70 also evidence stability of the company finances. Recently, the company has been doing share buybacks, it is buying back its shares in order to consolidate the shares and stabilize them in the market. The company shares have been suffering (trading at low price) of late and this is a strategy by the management to reinforce the company shares in the market. For the last four years, BSkyB Company shares have been trading steadily in the market. The shares recovered from the company's lowest ever in 2009 to trade at highest at 951GBP. This is a very good recovery; it was aided by the management’s decision to expand and integrate innovation technology in its services. The lowest price at which the company shares traded over the last four years was at 602.00GBP on March 31st 2010. Equally, the highest price at which the shares traded was at 951GBP on October 17th 2013. Compared to the competitor’s shares performance and the whole market performance, BSkyB Company shares have been performing well over the last four years. As such, the increase in revenues and profits increases the investors’ confidence. Investors do not only have confidence in the company stocks but also anticipate good earnings and returns. This makes the company shares to perform well in the market. The potential for growth has also contributed to the good share performance. The recent strategy by the company management to buy the shares back will stabilize and reinforce the shares in the market. As such, it is expected that the company shares will outperform the sector. This is also necessitated by the increase in the company earnings, which continue to record increased growth. In addition, investors confidence is at all time high, therefore, they will hold to the shares and other potential investors will purchase the company shares as well. The share buyback by the management will consolidate the company's stocks and therefore reduce considerably the number of company shares trading in the market help by investors other than the company itself. This will make the price of the shares to rise and hence will be expensive. For the next twelve months, the shares of the company are expected to outperform the sector and the market. The company's progress, the sector performance, growth potential, investor confidence and the shares performance in the market Indicate that the company shares will increase in their real value (intrinsic value). As such, the shares will be expensive, as the price will rise. According to all these indicators, the shares are will perform well. I believe that the shares are call option (buy) for investors. Investors should use the company's good performance and the other market indicators to buy the shares, as there is huge potential for growth. I therefore recommend that the shares are a buy. Bad market performance or anticipation of low market performance interpret that the investors should have put option or sell the shares. The hold proposition would mean that the company shares are performing as the sector, the market, and therefore no need of selling (hold on to the shares). I believe and suggest that the shares to be a buy. Conclusion This report has discussed the BSkyB Company in terms of SWOT analysis. A detailed analysis of the company’s strategic capabilities based on SWOT analysis has been discussed. The report has found that the it’s strong and quality contents are some of its strategic capabilities. In addition, it has been able to turn geographical limitation to an advantage. The report also gives an analysis of the company in the context in which it operates; the sector is expected to grow and therefore the company will as well grow. The report concludes by commenting on the company's share price performance over the last four years. References Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: Text and cases. Pearson Education. Kim, G. J. (2005). A SWOT analysis of the field of virtual reality rehabilitation and therapy. Presence: Teleoperators and Virtual Environments, 14(2), 119-146. Oliver, J. J. (2012). Winning in high velocity markets: the case of BSkyB. Strategic Direction, 28(10), 3-5. Zeng, F., & Yang, X. (2012). Marketing Strategy of Pay Channels. Asian Social Science, 8(15), p46. Read More