News Dues

Question:

You have been hired by a newspaper publisher who has been experiencing declining readership and, as a result, declining profitability. What would you suggest she do?

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Solution:

First, if readership (demand for your product) is declining, you should determine whether your competitors are experiencing the same problem (is it an industry-wide concern or is it particular to the client). In this case, it turns out that all publishers share the same problem and that television is the main culprit.

To address this issue your client could do two things:

  • Study other markets where television is prevalent but newspaper readership is high (like Japan) and uses any knowledge you can gain to promote readership in the U.S. Your client could share costs via newspaper publisher associations.
  • Explore the possibilities of phasing out of the newspaper industry and entering the television industry. This is highly improbable given the high costs of entry but you could explore any competitive advantages you could leverage to that industry and the opportunity of a joint venture with an existing TV company.

Second, if readership is down in the industry and your client still believes it can be profitable to stay in the industry, you need to utilize the marketing department to accurately determine customer preferences and tailor contents to them. Remember that any differentiation that is imitable will be quickly neutralized by competitors.

Third, examine your different geographic market segments to see if margins and demand differ greatly. If there are markets that are clearly still prospering, maybe your client could focus target readership efforts to these more profitable areas.

Fourth, build mechanisms to continually adapt to changing reader tastes. This could be accomplished by market studies, flexible and versatile staffs, etc.

Fifth, your client could focus on cost reduction as a means of increasing profitability. Possibilities include consolidating operations and/or re-engineering them. Consolidation would help in deriving economies of scale whereas re-engineering could identify and eliminate operational inefficiencies. Issues such as low capacity levels, changing input prices, and distribution and labor shift costs should all be explored. Lower cost could also lead to lower prices, which may stimulate demand.

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