This essay was written as part of final year studies in University College Cork.
Class: EC 3100 Coperate Strategy
Grade: 1st Class Honours
Outline a model of business objectives that best describes this company’s most recent strategy. Discuss the success of this strategy for this company, justifying the position you take with supporting evidence.
There are many quotes about strategy out there. For example, American academic Michael Porter once said, “The essence of strategy is choosing what not to do.” Corporate strategy is vital for any business big or small to survive. Without a plan, businesses would not achieve very much, even with the best of intentions. “If all you do is motivate, without a strategy, it’s like a warm bath. It’s nice. It’s not enough.” (Robbins 2017). In this essay, different models of co-operating strategy will be outlined for context. The selected model will then be assigned to the selected company. This will be done to help establish and identify the direction and objectives of the introduced company. Using the model, the strategy of the company will be described in detail. Finally using researched evidence, it will be investigated whether these approaches are having/have had their desired effect, or in other words are they successful.
When it comes to choosing the correct strategic model to assign to a company, there are three main choices. The first of these would be the Baumol model. The primary aim of this model is maximising the sales revenue of the company. Such companies tend to spend a lot of money on advertising to reach a broad audience of people. This advertising often leads to more sales. This is advantageous because a company can capture more market share and achieve growth. The second choice is the Williamson model. The central idea of this model is maximising utility often with the consequence of reducing profits. Finally, the Marris model can be seen as a growth maximisation. The model does this by diversifying its interest and achieving high levels of utility due to growth in assets.
The company under question for this assignment is American social media, news and micro blogging company Twitter. The company which is located in over 35 offices worldwide focuses and making its service an “open platform” and easy to use. (About Twitter 2017. ) The public company which is located in San Francisco was founded in 2006 is a self-publishing platform. At first, users were restricted to sending out tweets of up to 140 characters. Since then Twitter has integrated and diversified their service. For example, the introduction of video sharing site Periscope. (Reuters 2017). In recent years Twitter has tried to change its image from not just a social media website, but also a place for people to receive “breaking news and entertainment to sports and politics” (Twitter 2017). For example if you go to the Apple App store or Google play store you will not find the Twitter app under the “Social Media” section but rather the “News Section” For this reason and more, it is the Morris model that will be used to describe the company’s most recent strategies and the discussions that will follow.
The Morris model indicated that firms who follow it are utility maximizers and they do that by increasing profits. Because of this, it must be assumed that Twitter is reaching out to new markets and diversifying to increase profits. Before diving into why Twitter is finding new ways to improve revenue it is crucial to identify the factor that has pushed Twitter to do so. In 2016 Twitter did their research. This research brought up three significant discoveries when asking people who do not use twitter. Firstly people “didn’t know or simply misunderstood what Twitter was for.” (Twitter Blog What’s Happening 2016). Secondly “many thought of Twitter primarily as a social network, a place to find and connect with friends and family members.” People thought they were “supposed to Tweet every day” (Twitter Blog What’s Happening 2016). The fourth major issue facing Twitter is “Facebook and Snapchat are seeing strong user growth, and Twitter has not been able to keep pace with these companies” (Forbes 2016) Finally the fifth major issue facing Twitter is that they have “stubbornly stuck with its 140-character limit thus far” (Fool 2016)
Now with the issues identified. It is time to discuss how Twitter is combating these issues. First of all, the issue that Twitter simply can’t keep up with other social media platforms regarding increasing user growth. In fact, the recent numbers are very damming. Between the last quarter of 2014 and the last quarter of 2016, Twitter’s absolute monthly increase in active users is less to be desired. While Facebook and WhatsApp have gained 450 million plus new accounts in that period, Twitter has only gained 31 million If we compare Twitter’s numbers with Facebook. For every 15 new users Facebook is gaining, Twitter is only gaining one. (Business Insider UK 2017) Figure 1
So, have Twitter followed the Marris model to combat this issue? The Marris model suggests that firms will diversify as existing products can’t achieve a steady growth forever. But such an approach will only be followed if improving the original product. At first improving their product and usability is exactly what twitter tried to do. For example, the introduction of the “Instant Timeline.” The instant Timeline feature would give “new users great content pulled from the social network without going through the traditional setup process.” (New York Times 2015) The hope is doing this to make the process of “setting up an account is quick and nearly painless, and you are then plunged into Twitter’s information stream.” This can only be seen to have two objectives. First of all, to make the sign-up process easier and secondly to keep existing members using the service. This can also be seen with the introduction of the “Recap” feature. Kevin Weil, Twitter’s vice president of product, said that “the idea is to help you find the best of what you missed, whether it has been a day or just an hour since you last checked the service.” (New York Times (2) 2015) The recap feature still allows your feed to work in a chronological fashion, but now the first 10-15 tweets a user will see on their feed will be the 10-15 that received the most interactions from the tweets that would appear on the user's normal chronological feed. In other words, Twitter has been doing a lot to make their service easier to use. To help its users find the information they are looking for as quickly and as seamlessly as possible.
The next issue facing Twitter was the fact people “do not know or simply misunderstood what twitter is for” as well as people seeing Twitter as just another social media website to speak with friends and family rather than the news site it aims to be. To combat these two issues, Twitter has started a new campaign on Twitter itself to reemphasize what twitter is all about. This was done in a video format. The video aims to answer why people should use twitter and how hashtags can help everybody have their say on a story. The video gives examples of the questions users should be asking themselves when using the site such as “What’s everybody talking about?” and “What’s trending?” Twitter is the place to see “what’s happening in the world right now.” (Twitter Official 2016) The same video gives examples of hashtags that have been very popular in recent times. For example, #GameOfThrones #Hamilton #PokemonGo and #BlackLivesMatter. The marketing campaign is very direst and does not refer to following your friends and family. Twitter has succeeded in creating a marketing campaign that is clear and to the point but the decision to spearhead that campaign on Twitter itself is questionable considering the group of people the campaign targeted were people who do not have a twitter account.
Regarding the issue “Am I supposed to tweet every day?” or “how often should I tweet?” Twitter has done very little to answer this question directly. Saying this Twitter has published many articles on how to use the website and how to get the most out of the service, whether you be an individual or business. For example, “how to connect with your customers on Twitter” (Twitter Basics 2016)
Lastly, Twitter’s campaign to increase the characters of a tweet to 280 is in the early stages. At the time of writing the new 280 character limit is “available to a small group of Twitter users.” "We want every person around the world to easily express themselves on Twitter," the company said, "so we're doing something new: We're going to try out a longer limit, 280 characters." The key word there is “try” The 280 character tweet is a test, and all users will have to remain and see if it is here to stay.
Now that strategy model of Twitter has been identified. As well as this the problems facing Twitter and Twitter is combating these issues. The questions remain, has the strategy been successful?
With millions of people using Twitter and millions more joining each year it would be easy to think Twitter is thriving. But when the numbers are examined more closely the results are a little more grey. To start with the negatives the Twitter share at the end of closing stood (October 20th, 2017) at US$ 17.87. (Nasdaq Index). While this number is higher than many days over the last few weeks, over the last few months, the Twitter share price has consistently fallen from highs of US$ 73.31 on the 26th of December in 2013. Even since the 17th of August 2017, the stock price has dropped from US$ 20.17. Although this is an improvement from an all-time low of $13.92 in May 2016. On top of this “the company’s total revenue declined by 8% year-over-year (y-o-y) to $548 million on the back of a decline in U.S. advertising revenue.” (Trefis Team Forbes 2017)
During the first quarter of 2017, the number of active Twitter users rose to a high of 328 million. A 26 million increase in two years previous. (The Fool Daniel Sparks 2017)/Figure 2
In summary, Twitter fits into the model of the Marris Model. Due to a reducing share price the company has diversified its product. This has not been a total success as the Twitter still lags behind social media websites such as Facebook, and the share price is again falling. But Twitter has increased its number of active users and will hope to continue to do so. While the number is hard to quantify, Twitter does play a massive role in sharing news on topics such as sports, music, and politics. Donald Trump and his tweets are a great example of this as they are always discussed in the news. While many news outlets use Twitter to break to spread breakings new. All in all, twitter is a place if not the number one place to go for news. That in itself is a great success.
