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Martha Stewart Living Omnimedia A Case Solution

Solution Id Length Case Author Case Publisher
2137 2773 Words (15 Pages) Susan Fournier, Laura Winig, Kerry Herman, Andrea Wojnicki Harvard Business School : 501080
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Martha Stewart Living Omnimedia (MSO) is a company that was founded by Martha Stewart and went public in 1999. The company is known for the founder Martha Stewart, who has become a public figure amongst the American audience, and people across the country follow her advice on cooking and lifestyle. Martha Stewart’s personal brand has been responsible for the company’s success and also its most important strategic issue; the company’s inability to successfully diversify from a concentrated source of revenue that has been from Martha Stewart’s own publications. 

The company’s journey from 2000 till 2012 has been turbulent with initial successful years in the decade, imprisonment of Martha Stewart, multiple changes in members of the board, and heavy losses later on. The purpose of the report is to provide a comprehensive case analysis of Martha Stewart Living Omnimedia (MSO). 

Following questions are answered in this case study solution

  1. Introduction

  2. External Environment

  3. Internal Environment

  4. Strategic Issues

  5. Strategic Recommendations

  6. Case Follow-Up

Case Analysis for Martha Stewart Living Omnimedia A

i. Corporate Strategy

In terms of the degree of diversification, the company has aimed to have high diversification in related businesses. However, the company has failed to do so, and the level of diversification has remained low. The majority of the company’s revenues came from publishing, and this included two print magazines; Martha Stewart Living and Martha Stewart Weddings. According to financial statements, publishing was responsible for 70% of the businesses’ revenue. This was reduced to 62% as the company made efforts to diversify and earned revenue from merchandising and the internet. However, the percentage was still 62% in 2012, and further efforts to diversify were not made. 

Merchandising and internet commerce had helped MSO diversify from its publishing business. However, diversification in unrelated categories outside of the Martha Stewart brand name had shown almost no success, and this made the company dependent on one single person and brand; Martha Stewart. MSO tried to launch a new Magazine called Blueprint, but it failed within a year. Martha Stewart and Charles Koppelman’s daughters started a show called “Whatever Martha,” but it too didn’t last long. In 2003 MSO launched two non-Martha magazines called Whole Living and Everyday Food, which were later discontinued in 2011 by the chief operating officer Lisa Gersh due to poor performance.  

MSO had been involved in a few acquisitions to help the company achieve its diversification. The company tried initially to diversify business through contractual and licensing agreements. However, when not possible, the acquisition was used. For example, in 2007, MSO acquired a 40% stake in Wedding Wire, which was an online marketplace. 

ii. International Strategy

MSO didn’t have an international strategy till Lisa Gersh took office in 2011, and the focus was mainly on the US market. In 2001, the company tried to license its products and publish a magazine in Japan, but this had failed. The international strategy in 2011 was a global strategy with US content and products being licensed to be sold around the world. Tailored management and marketing for different countries were not established. Martha Stewart also did not directly sell in international markets but leveraged retail partnerships and licensing agreements to reach out to customers in these countries.  

iii. Business-Level Strategy

The company followed a differentiation strategy from the start. Martha Stewart had a focus on perfection in any task that was performed. The merchandise that was sold as branded low-cost consumer goods were differentiated through the Martha Stewart brand. The brand showed that special attention to detail had been given to these products and wouldn’t disappoint customers. This allowed MSO to charge a premium on these products, and it also helped Martha Stewart’s brand to grow. 

However, over time the prices of Martha Stewart’s publishing segment were reduced to match competitors’ pricing, Oprah Winfrey, and low-cost online magazines. MSO’s broadcasting business was impacted by low-cost internet advertisements that were placed on websites that had greater traffic than Martha Stewart’s online website. 

2. External Environment

i. Strategic Opportunities

One of the opportunities that exist in the industry is doing business over the internet or e-commerce. The e-commerce sales in the USA in 2011 were $162 billion, and these had increased to $186 in 2012. This shows that the e-commerce market has potential. MSO can leverage this opportunity by creating an online store for its merchandising. This could help increase its sales and, at the same time, reduce its reliance on licensing and retail partnerships such as those with Macy’s, Kmart, and J.C. Penny. 

The increased use of the internet also creates opportunities for MSO to shift its publishing and advertisement revenues online. Martha Stewart can create its online blog, attract traffic, and earn revenue through internet advertisements. The same website can also be used to sell Martha Stewart’s magazines and books as well. 

Social media usage was also rising in 2012, with popular social media networks such as Facebook and YouTube being a good opportunity for MSO to deliver content. YouTube had about 200 million users in the USA in 2012, and this number was increasing. Social media provided MSO with the opportunity to create content, develop viewership, and monetize such content to earn revenue through social media advertisements. Content delivered through social media also had the benefit of being less costly as compared to traditional broadcasting methods such as TV. 

MSO also has the opportunity to enter other large and emerging economies with young viewers interested in cooking and lifestyle content. Examples of these economies include developed economies like Canada, UK, Germany, Japan, other EU countries, and emerging economies like China, South Korea, Middle East, and African economies.   

ii. Strategic Threats    

One of the main strategic threats for MSO is that magazine readership is declining. The young generation, in particular, is not keen on reading magazines and would rather prefer reading short blogs, watch vlogs, or read social media posts. On the contrary, readership for e-magazines, e-books, and e-newsletters is on the rise. MSO needs to create new electronic forms of content to ensure that it is sold to younger generations as well. 

The viewership for traditional TV is likely to decline in the future with people switching to internet TV, OTT, and online content such as YouTube. Advertisement spending by brands on traditional TV is also likely to decline as brands spend money on alternative channels such as the internet. This decline is already evident in MSO’s revenues earned through broadcasting, which is currently only through traditional TV advertising.  

Similar to the physical retail space, the online retail area is also dominated by rapidly growing large retailers that include Amazon, eBay, Macy’s, etc. To ensure that its products are available to more people, MSO needs to make sure that these products are listed on online retail marketplaces as well. 

American culture is changing as well, and this needs to be taken into consideration for lifestyle content that is produced by MSO across channels. The number of working parents is increasing. People are spending more time at work and have less time to spend on their homes. This means that traditional home and food tips are less relevant, and people would look for more quick DIY tips. This also presents an opportunity for MSO to create merchandise products for working Americans with busier lives.  

iii. Industry Competitive Analysis

MSO faces competition in both media and merchandising through multiple areas. In TV broadcasting, other lifestyle TV programs challenge their positions with better ratings and a larger audience. These include direct competitors such as Oprah Winfrey, Rachel Ray, and indirect ones such as Ellen DeGeneres, Jimmy Fallon, Jimmy Kimmel, etc. 

In publications and magazines, MSO faces competition from lifestyle magazines such as the Time magazine, Womansday, O the Magazine, and indirect competition from magazines such as Vogue, entertainment weekly, cosmopolitan, entrepreneur, Elle, etc. People have shifted from reading lifestyle magazines to read ones that focus on health and entertainment, which means that sales of lifestyle magazines are affected because of these. 

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