978-1259278211 Case 22 Solution Manual

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Teaching Note: Case 22 – World Wrestling Entertainment

Case Objectives

1. To discuss corporate strategy choices and how to apply the concepts of innovation to a

firm in the entertainment industry.

2. To examine how tangible and intangible resources are tied to a firm’s success.

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

Chapter Use Key Concepts Additional Readings or

Exercises

12: Managing

Innovation; scope of innovation;

See NOTE additional reading

6: Corporate-

Corporate strategy; diversification;

View a video link of WWE’s

3: Internal

Resource-based view of the firm Watch videos at the WWE

4: Intellectual

Intellectual and human capital;

View the NOTE to visit

Case Synopsis

World Wrestling Entertainment (WWE) announced on January 27, 2015, that its WWE

Network, which had been launched just 11 months earlier, had surpassed one million subscribers,

making it the fasting-growing digital subscription service. Vince McMahon had taken over a

small wrestling business from his father and built it into a large national business. For years, the

firm managed to show consistent growth by attracting more and more fans. In an effort to

diversify, in 1999, shortly after going public, WWE launched a eight-team football league called

In the years since that misstep, CEO Vince McMahon explored new avenues of growth and

turned pro wrestling into a perpetual traveling road show. WWE used wrestling’s increased

popularity to build up a stronger ad-supported Internet presence, where content can be watched

Regarding competition, the firm has had to face a challenge from mixed martial arts (MMA), a

growing form of combat sport that combines kickboxing and grappling. Because of its similarity

to wrestling, this new sport might pull away some of WWE’s fans. The question remained: could

WWE identify opportunities for further diversification and expansion to maintain its current

success?

Teaching Plan

This can be a fun case. While not all students have seen a WWE wrestling match, there is usually

at least one fan in a class. This person’s enthusiasm seems to energize the room. Although the

focus is primarily on how to grow a business with an innovative business model, the importance

of identifying and leveraging both tangible and intangible resources is key to the discussion.

Therefore, this case can be positioned fairly early in the course to prepare students for the more

formal (and boring) corporate strategy discussions to follow.

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

This case can start with an icebreaker. Ask students how many of them have seen a professional

wrestling match, and whether this was on TV or in person. Ask students who are fans of WWE

why they are fans. The answers may be more about the entertainment value, the story lines about

Here’s where a quick visit to the WWE website at http://www.wwe.com/worldwide/ and a look

at video highlights at http://www.youtube.com/user/WWEFanNation can get the class excited.

Before engaging in discussion, you might want to test student’s basic knowledge regarding the

Which statement is most true?

a. WWE used to own a football team.

b. WWE has a line of toys.

e. All these statements are true.

ANSWER: e. In 1999, shortly after going public, WWE launched an eight-team football league

called the XFL. WWE has a licensing agreement with toymaker Mattel to sell DVDs, video

Was WWE successful at exporting this very violent, very American content to the predominantly

Muslim countries of Egypt and UAE?

a. Yes

b. No

ANSWER: a. Over the past few years, WWE introduced live performances in six new countries,

Discussion Questions:

1. What corporate innovation strategies did Vince McMahon use to grow World Wrestling

Entertainment?

2. What resources does WWE have and how valuable are they?

3. What are the future prospects for WWE? What should be done to expand or grow the

business?

Discussion Questions and Responses

1. What corporate innovation strategies did Vince McMahon use to grow World Wrestling

Entertainment?

Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

Innovation involves using new knowledge to transform organizational processes or create

Some of challenges of innovation involve choosing when and how to continue to innovate, the

scope of future innovation and the pace, as well as whether or not to collaborate with innovation

Before proceeding, firms must first define the scope of the innovation efforts, and they must

ensure that their innovation efforts are not wasted on projects that are outside the firm’s domain

of interest. In defining the innovation scope, a firm should answer several questions:

●How much will the innovation cost?

●How likely is it to actually become commercially viable?

●How much value will it add; that is, what will it be worth if it works?

●What will be learned if it does not pan out?

Vince McMahon needs to make sure the above questions are answered before committing the

Vince took after a small wrestling operation and turned it into a large and growing national

business by taking several steps: he began to challenge the existing regional structure of the

He broke with established tradition by admitting to the public that wrestling matches were

scripted. He had the creative insight to use the storylines and characters to build up an audience

for his matches. Vince was good at applying this soap opera style to the wrestling business. Vince

Even though McMahon took risks, he also was quick to learn from his mistakes. Once he

Organizations must have the entrepreneurial orientation necessary to succeed in a new venture.

Students should assess the vision, dedication and drive, and commitment to excellence

Interestingly, Vince McMahon has exhibited each of these dimensions in making WWE what it is

today. In short, he has used his autonomy (first buying the firm from his father and then running

NOTE – ADDITIONAL READING ASSIGNMENT:

This link offers quotes from Vince McMahon discussing WWE’s rebranding in April of 2011 –

WWE will no longer stand for World Wrestling Entertainment. It will just be WWE, plain and

simple: http://articles.latimes.com/2011/apr/07/business/la-fi-ct-wwe-20110407

McMahon discusses several potential new WWE ventures, some of which may require them to

expand beyond their core, move them “beyond the wrestling mat.” However, as one analyst says,

“Clearly, their prospects in terms of growth are limited if they stick to their knitting.” Which of

these ventures offers the highest profit potential in your opinion? Which ones might be most

successful?

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.

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

Vince’s efforts to diversify have not always been well thought out. He appears to have had

difficulty in following a path of related diversification. As the chapter in the text indicates,

related diversification enables a firm to benefit from horizontal relationships across different

WWE’s boldest effort at diversification in the form of XFL suffered from a lack of links to the

wrestling base. Football is already established as a spectator sport with its own rules and

procedures. Vince was not able to sufficiently differentiate his form of football from what had

The plans to push for more investments into television shows and motion pictures would draw

off some of the entertainment aspects of the wrestling operation. But these were very expensive

A question that should be raised is this: what effect has McMahon’s diversification effort had on

WWE? It is likely that the McMahon’s diversification efforts in the pasts (into the XFL and

other ventures) had taken the firm’s eyes off of its core business. During the time of significant

WWE faces growing competition from new sources, such as reality based television shows.

These shows attract the same demographic (the 12-34 age group) that watches WWE shows. The

When organizations grow, it’s important to be aware of possible detrimental managerial

behaviors that indicate managerial self-interest, such as egotism or growth for growth’s sake.

These can erode the creation of a firm’s value. Vince McMahon’s public persona appears to be

highly driven by his ego. His daughter, Stephanie, was heavily inserted into the character line-up

as both a wrestler and a good vs. evil figure in the continuing struggle for control between family

members (part of the story line). She is married to Triple H (Paul Levesque), one of the wrestling

superstars. Does this pose a problem for the firm’s future growth?

CASE UPDATE:

Stephanie McMahon Levesque is on the management team, as Chief Brand Officer. Her

husband, Paul Levesque, (Triple H) in turn, is the Executive Vice President for Talent and Live

Events. See the Governance website at http://corporate.wwe.com/governance/executive.jsp

2. What resources does WWE have and how valuable are they?

Referencing Chapter 3: Analyzing the Internal Environment

It’s important to consider the concept of the resource-based view of the firm, and the three key

types of resources: tangible resources, intangible resources, and organizational capabilities that

can help a firm sustain a competitive advantage. WWE’s profile might look like this:

Tangible Resources:

Financial Resources: High cash flow, low capital expenditures, almost no debt

Technological: Rights to characters – VERY VALUABLE

Intangible Resources:

Human: Wrestlers with acting capabilities, good script writers

Innovation: Capabilities for developing compelling characters and storylines – VERY

Reputation: Strong brand name, relationships with sporting arenas, relationships with television

In the context of where WWE competes, these resources provide a valuable competitive

advantage to WWE. The characters created by WWE (“Stone Cold” Steve Austin, Triple-H, etc.)

differentiate WWE’s offerings from those of the competition. The characters also provide

continuity in the sense the audience is interested in knowing what is happening to these

characters and so tune into WWE. When McMahon announced that wrestling was scripted, it

Referencing Chapter 4: Assessing Intellectual Capital

Consider the concepts of intellectual capital and human capital, both of which are intangible

assets that a company such as WWE needs to have in order to compete successfully. Intellectual

capital is a measure of the value of a firm’s intangible assets, its reputation, employee loyalty and

Dynamic capabilities are a firm’s capacity to build and protect a competitive advantage, which

rests on knowledge, assets, competencies, complementary assets, and technologies. Dynamic

NOTE: Check out how WWE markets their personality superstar John Cena:

http://www.wwe.com/superstars/raw/johncena/

The athletes seem to be the primary competitive resource WWE has. Would Vince McMahon

agree?

3. What are the future prospects for WWE? What should be done to expand or grow the

business?

The McMahons seem to have reacted well to the challenges the company faced following the

unsuccessful diversification moves. The company is now looking at more focused related

diversification that plays to WWE’s core competence, such as the YouTube channel original

programming and the relationship with HuluPlus. They may also increase the number of road

The succession issue is important for this tightly controlled business. At present, Vince

McMahon runs the company. Wife Linda was heavily involved until she left to run for Senate in

2009 and 2012 (in Connecticut – she was not successful). Daughter Stephanie is immersed in the

business. Son Shane was involved but has left to pursue his own interests. The point here is

whether Shane and Stephanie will have the experience to run the company when their parents

NOTE – VIDEO VIEWING POSSIBILITY:

Watch the video of the first fifteen minutes of the 2009 WWE annual shareholders meeting

linked here:

http://wwevideowm.fplive.net/wwevideo/wmv/adhoc/corporate/200905/shareholders2009_750.

wmv

Both Linda and Vince McMahon lead the shareholders meeting. It might be interesting to WWE

fans to see the different personality Vince portrays in this corporate setting.

To what extent do you believe WWE will be successful in their diversified entertainment

venues? More generally, after listening to Vince and Linda McMahon discuss WWE, would you

be more or less likely to invest in WWE stock yourself? Why?

ADDITIONAL CASE INFORMATION:

One other issue facing the wrestling entertainment industry threatens its continued viability: the

use of steroids and other risky lifestyle choices has contributed to the early deaths of dozens of

wrestlers. Read the linked article from 2004 and watch the accompanying audio slideshow:

http://www.usatoday.com/sports/2004-03-12-pro-wrestling_x.htm

http://www.usatoday.com/money/graphics/wrestle/bigaudiotemplate/flash.htm

In 2007, after the deaths of several more wrestlers, including the double-murder/suicide of WWE

wrestler Chris Benoit, the WWE announced the suspension of 10 of its wrestlers for violation of

its “wellness policy”:

http://sports.espn.go.com/espn/news/story?id=2998062

The WWE will continue to come under scrutiny for this, specifically by the U.S. House

Committee on Oversight and Government Reform regarding their talent wellness policy. (See

WWE’s code of business at http://corporate.wwe.com/governance/code-of-business-conduct and

full drug testing policy here: http://corporate.wwe.com/wellness/substance-abuse-drug-testing-

policy ) What is WWE’s responsibility, and is there anything further WWE should do here? Does

this threaten WWE’s growth prospects internationally?

WWE seems to be taking steps to continue to develop its key talent: In 2013, in collaboration

with Florida’s Full Sail University, WWE opened the World Wrestling Entertainment

Performance Center. WWE executive Paul Triple H Levesque pointed to the seven professional