978-1259278211 Case 21 Solution Manual Part 1

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Teaching Note: Case 21 – Yahoo!

Case Objectives

1. To discuss how leadership can implement strategy.

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The

Chapter Use Key Concepts Additional Reading and/or

Exercises

SECONDARY

4: Intellectual Assets

Intellectual and human capital;

5: Business-Level

Competitive strategy; generic

6: Corporate-Level

Acquisition; diversification; synergy NOTE stock price,

8: Entrepreneurial

Strategies

Opportunity recognition

PRIMARY

CHAPTERS

11: Strategic

Leadership

Leadership; learning organization NOTE additional reading

Innovation

Case Synopsis

On January 25, 2015, Marissa Mayer, chief executive of Yahoo, announced that Yahoo would

spin off its remaining 15.4 percent stake in Alibaba, China’s leading e-commerce firm, into a

separate company. The spin-off would allow the firm to avoid any taxes on the transaction, but it

would represent the final step in the loss of its most valuable asset. The Alibaba stake had

In July 2012, Mayer had been lured away from a senior post at Google to

become the newest CEO charged with the mission to revive the ailing web

portal, Yahoo. Mayer represented the fifth CEO at the firm since Carol Bartz

left in September 2011. The firm had been struggling since 2006 to find a

business model that would allow it to generate new sources of revenue.

Originally a free website, offering a wide variety of free services, Yahoo had

In an attempt to revitalize Yahoo strategy, previous CEOs had reshuffled top executives; tried to

refocus the firm on its strengths in content areas such as news, sports, and finance; emphasized

services such as email and instant messaging; outsourced other services such as job listings and

Upon her arrival, CEO Mayer tried to recruit more engineering talent. She also tried to boost

employee morale by offering new cell phones (either Apple or Android devices) and free food,

but then she also abolished Yahoo’s work-at-home policy, requiring everyone to come back to

Mayer, who built her reputation overseeing Google’s Internet search business, indicated that

Yahoo remains committed to the search business. She was discussing changes to its 10-year

search partnership with Microsoft, which was at the midway mark. In November 2014 Yahoo

which accounts for 3 to 5 percent of all searches. Although Mayer’s efforts won some praise

from analysts, they were not sure whether these efforts would be enough to revive Yahoo. Above

all, she had not been able to provide a clear vision of what the firm would stand for at the end of

her shuffling of the firm’s products. Although there were some strong signs that Mayer had

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

back to the Case Objectives Table to identify any additional readings and/or exercises so they can

be assigned in advance.

1. What was Yahoo’s original strategy and how has it changed under the different CEOs?

2. What has Marissa Mayer done to reconfigure Yahoo, and what challenges remain? Do

you think Mayer will be successful in reinvigorating the firm?

Discussion Questions and Responses

1. What was Yahoo’s original strategy and how has it changed under the different CEOs?

Prior to answering the specific case questions, the instructor might want to position the

discussion by reviewing what strategic management really is:

Referencing Chapter 1: Strategic Management

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter

1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an

organization undertakes in order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

As we can see, leaders face a large number of complex challenges. Leaders must be proactive,

anticipating change and continually refining changes to their strategies. This requires a certain

level of “ambidextrous behavior,” where leaders are alert to opportunities beyond the confines of

An interesting question that the instructor can ask at this point is: what business is Yahoo! in?

Some students might say Internet technology, or web search; others might say content services,

or specifically providing a “portal” to services on the Internet. The answers to this question will

help students understand the importance of vision and mission: the leader must have a clear idea

ADDITIONAL READING NOTE: One interesting and innovative idea came from an analyst in

2013, that Yahoo should pay individuals to use its search engine. The concept is as follows:

“every day, randomly and dynamically select users performing a search on Yahoo and offer them

50 US dollars. If the user accepted the offer, they would simply input their PayPal email address

and Yahoo would send the money to that account. If the user didn’t have a PayPal account yet, an

email would be sent to their email address walking them through the process of opening one.

See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision,

mission, and strategic objectives. Leaders must communicate their initial vision of the

organization’s purpose: what was the original goal that would evoke a powerful and compelling

mental image of a shared future, one that would be massively inspiring, overarching, and long-

term, that represented a destination that is driven by and evokes passion? How well did Yahoo’s

leaders seem to do this?

Regarding the organization’s vision, originally, in 1994, Yahoo’s founders had created the

company as “Jerry’s guide to the World Wide Web,” intending the site to be the Internet’s

The organizational mission also needs to be considered: a mission encompasses both the purpose

of the company as well as the basis for competition and competitive advantages. In writing a

mission statement, it is important to understand the definition of the business by answering these

questions: 1) Who are its customers? 2) What customer need is the organization trying to fulfill?

and 3) How does the business create and deliver value to customers and satisfy their needs?

Organizations must respond to multiple constituencies if they are to survive and prosper, and the

mission provides a means of communicating to diverse organizational stakeholders. Although

Anticipating that things might change, an organization’s leadership must then establish strategic

objectives to operationalize the mission statement. That is, objectives help to operationalize the

In 2009 just after the hand off of Yahoo’s search operations to Microsoft, CEO Bartz’s vision for

Yahoo was “to be the center of people’s lives online,” but was this specific enough, or inspiring

CEO Marissa Mayer’s mission appeared to be to make Yahoo a stronger force on the mobile

platforms represented by smartphones and tablets. She wanted the company to make the

transition from the desktop to mobile devices. She also believed that more personalized content

The basic question strategic management tries to answer is: How can we create competitive

advantages in the marketplace that are not only unique and valuable but also difficult for

Referencing Chapter 5: Business-Level Strategy

In order to achieve a sustainable competitive advantage, Yahoo had to assess its ability to

contend with other companies who also provide Internet content and services. The question of

how to compete in a given business to attain competitive advantage requires an assessment of the

types of competitive strategies, including the three generic strategies that are used to overcome

the five forces and achieve a competitive advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The

Because of the business it’s in, Yahoo cannot be unique enough to stand out in the crowded

marketplace, so differentiation is not an option. Regarding overall cost leadership, Yahoo has not

been focused enough on a particular line of business in order to accrue enough scale or scope to

Recognize that whatever strategy Yahoo chooses, it must maintain parity with other firms in its

Referencing Chapter 6: Corporate-Level Strategy

Corporate strategy focuses discussion on the questions of what businesses a corporation should

compete in, and how the businesses should be managed so they can create “synergy” – creating

Diversification is the process of firms expanding their operations by entering new businesses.

Some possibilities include:

●Mergers and acquisitions

●Strategic alliances

Whatever the choice, it should create value for all stakeholders – employees, suppliers,

distributors, investors, customers and end users, and the company itself. The choice of

When achieving synergy through diversification, a firm has two choices: related diversification

through horizontal relationships with related businesses, sharing tangible and intangible

resources, and leveraging core competencies; and unrelated diversification though hierarchical

relationships with unrelated business. In this case, value creation derives from the corporate

Acquisition is the incorporation of one firm into another through purchase. It can be a means of

obtaining valuable resources that can help an organization expand its product offerings and

Growth strategies should create value for all stakeholders. Corporations can achieve synergy by

sharing tangible and value-creating activities across their business units; or through the use of

In 2001, new CEO Terry Semel tried to reverse the sharp decline in advertising revenues caused,

in part, by the dot-com boom and bust of the late 1990s. Semel tried to attract back the big

advertisers by developing technology so Yahoo could offer animation, video, and other rich-

Semel also decided to acquire Inktomi and Overture Services in order to develop Yahoo’s own

search engine and improve its search advertising system. This growth made it difficult to make

When Semel resigned in 2007, interim CEO and co-founder Jerry Yang announced a new

direction for Yahoo: to re-establish Yahoo as the premier web portal, a top choice for marketers,

Obviously, when she took over in 2009, CEO Bartz felt that services such as job hunting were

ultimately unrelated, so handed off those to third-party providers. She also felt a deal with

Now, CEO Marissa Mayer appeared to believe that making multiple small acquisitions was a

NOTE – WEB LINKS TO FINANCIAL DATA:

Use the tools from Yahoo Finance to look at the company’s stock price performance:

http://finance.yahoo.com/q?s=YHOO&ql=0

Check out Yahoo’s competitors at http://finance.yahoo.com/q/co?s=YHOO+Competitors and

According to Yahoo Finance, MSN is a leading provider of Internet content and services. Its

msn.com web portal provides a wide range of news, information, and entertainment content, as

well as online shopping and a search service powered by Bing, Microsoft’s search engine

Worldwide, Yahoo competes with Baidu in China and Japan, and Yandex in Russia.

CEO Mayer’s pace of acquisitions had raised concerns. For instance, when she acquired Tumblr

in May 2013, she felt she had to offer Tumblr’s founder David Karp a position at Yahoo in order

to help with the integration. As one analyst pointed out, offering someone $81 million to stay at

the company for four years would not pay off in higher Yahoo revenues and profits: “Yahoo is

buying four years of an executive who has built a company with no revenue, who lacks

experience working in a big company, and who will be a middle manager with diminished

Even with that rather dismal prior performance history, new CEO Mayer was still continuing to

acquire companies to boost Yahoo’s overall portfolio. Here’s an interactive listing of the 15

The idea behind these acquisitions appeared to be using these companies’ technology to enhance

and improve what Yahoo already had. For more stories about Mayer’s strategy to acquire talent

rather than directly hire it, see

http://www.money.cnn.com/2013/07/15/technology/innovation/yahoo-marissa-mayer-strategy/ ;

http://articles.washingtonpost.com/2013-07-16/business/40607735_1_marissa-mayer-mayer-s-

tumblr ; http://www.marketplace.org/topics/business/has-marissa-mayers-acquire-hire-strategy-

yahoo-paid

Although Yahoo’s stock price had gone up since Mayer’s arrival, the fundamental value of the

firm and its acquisitions remained questionable. As some analysts pointed out, the stock

appreciated primarily because shareholders were happy with Mayer’s decision to sell off roughly

half of Yahoo’s stake in Chinese Internet services provider Alibaba Group, seeing an immediate

Would Mayer be as lucky with HER acquisitions?