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Martha Stewart Living Omnimedia offers consumers a variety of products and services in publishing, Internet, broadcasting media platforms, and merchandising product lines. With a global multimedia reach of around 100 million a month, MSLO still does not have a significant online presence. The companys main focus continues to be selling books, utility applications, television and video programs, and lifestyle products to its main consumer demographic, middle-aged American women. Although this is a relatively reliable and loyal market, the company remains in an uncertain business state and requires strategic alternatives.
Recapitulation of Strategic Alternatives
Currently, as described in the SWOT paper, MSLO has two main advantages in the market. As mentioned above, the target demographic is a loyal and reliable market. According to Emarsys (Stewart, 2019), returning customers are likely to spend 67% more on the companys products compared to new customers. Furthermore, middle-aged American women are more likely to have the spendable income necessary for larger purchases, unlike, for example, teenagers.
Another existing advantage of MSLO is the cost policy, with the prices typically lower than those of the companys competitors. Therefore, the company is likely to be the favored choice by new customers with no prior loyalty to a brand. However, after the arrest and incarceration of Martha Stewart in 2004, the brand has struggled with its image. Furthermore, in the progressively digitized world, MSLO is losing out a big portion of the market by not having a significant enough online presence. Below is the SWOT analysis from the previous paper:
Table 1. SWOT Analysis.
Determination of the Strategic Alternative
The COVID-19 pandemic has been instrumental in presenting an opportunity for MSLOs investment into its online image and presence. Since the start of lockdowns across the US and the world, the target demographic has gained a reason to require online platforms. Where before the middle-aged American women would not be that present on the Internet, the situation of the pandemic has forced everyone and everything to turn remote. Therefore, this is a perfect opportunity for MSLO to explore the new social media platforms, promoting its products and services to not only the loyal customer base but to an expanded demographic.
Furthermore, the fact that the company is no longer affiliated with Martha Stewart, responsible for the branding fiasco, is beneficial for MSLO as well. Although the name of the company still contains the name of its founder, Stewart had not been the CEO in almost 20 years. According to Fournier & Srinivasan (2018), it is vital to separate the business brand from the personal brand of the managers and owners of the company. It follows that it can be incredibly detrimental to the reputation of the brand, as was demonstrated by the loss of trust in MSLO after Stewarts incarceration. Therefore, the management of MSLO must focus on rebranding the company to emphasize the brands independence from its founder.
However, although the problem areas are clear, there need to be specific strategic alternatives that can address these issues. According to Dr. M. Thenmozhi (qtd. in Teeboom, 2019), there are six types of strategic alternatives concentration, diversification, stability, turnaround, divestiture, and liquidation. As discussed in the SWOT analysis paper, some of the options include market investments, mergers, joint ventures, as well as product and customer development. However, the necessary adjustments for Martha Stewart Living include:
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Marketing with an emphasis on social media content.
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Relocation of resources from the more outdated television and radio broadcasting.
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Improving the brands image.
Calculated Potential Inhibitors
In order to implement the new strategies in the most efficient way, the potential inhibitors must be calculated for each one of them. As mentioned in the previous section, there are numerous alternative strategies for a company to attempt. However, each one of them comes with potential trade-offs and dangers. Such as, forming an external alliance is likely to raise the prices of goods and services, which would diminish the existing competitive advantage that Martha Stewart Living has. In the case of product- and customer- oriented strategies, these will likely incur significant costs with no guarantee of the strategy paying off. Nevertheless, developing a new market through an increased online presence while solidifying the existing one might be the right strategy for the company.
Financial Considerations
In the short run, forming a strategic alliance will be the more cost-effective choice than product- and customer-oriented strategies. Nevertheless, as mentioned above, there is a risk of a long-term monetary loss due to the increased prices of the products and services. On the other hand, online marketing and improving the social media presence can be costly, however, it is possible to find cheaper solutions, such as by outsourcing.
Lacking Information
In Developing Value-Enhancing Strategies
Although it is possible to theorize on the possible value-enhancing strategies that can be used by Martha Stewart Living, there is crucial insider information that is lacking. Some private company information, such as trade secrets, might have a valuable impact on decision-making. For example, if it was known whether any companies were already interested in partnering up with MSLO, this would affect the development of the strategies. Furthermore, organizational structure and the company culture could also be a factor.
In Calculating Possible Risks in the Proposed Alternatives
As for the risk management of the proposed alternatives, the reasons are similar for an inaccurate prediction. Unless all sensitive information is known, it is impossible to make completely accurate predicaments. And even with full information, it is not always the case that the risk can be predicted entirely. However, it is possible to figure out the most likely and the most damaging risks and safe proof the strategy against them. For example, if the company is lying about its numbers, or if any of the current managerial staff is planning on transferring to a different company, this could pose a risk for the alternative strategies.
Reiterate Financial Findings
As per the previous findings, below are the calculations of the Martha Stewart Living public financial records:
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Return on total assets:
Profits after taxes / total assets = 6,964,000 / 121,479,000 = 5%*
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Current ratio:
Current assets / current liabilities = 81,682,000 / 36,549,000 = 2,24*
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Debt-to-equity ratio:
Total debt / total shareholders equity = 0 / 68,685,000 = 0*
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Total assets turnover:
Sales / total assets = 22,963,000 / 121,479,000 = 0.19*
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Cash flow per share:
(After-tax profit + depreciation) / number of current shares outstanding = 11,839,000 / 56,953,958 = 0.2*
* The data for calculations is drawn from the MSLOs 2015 annual report for the US Securities and Exchange Commission (Last10K, 2015).
As of today, this is the most recent report that is available publicly.
Risks and Benefits of Forming a Strategic Alliance
Forming a strategic alliance, when done carefully and considerably, can be very beneficial for the firm. Some of the main benefits include, but are not limited to:
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Gaining a new client base*
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New business territories*
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Additional sources of income*
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Intellectual capital*
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Reduced risk*
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More affordable than a merger*
*The list was partially taken from PSMJ Resources ( 10 Ways Your Firm Can Benefit from a Strategic Alliance, 2020). Other benefits include shared costs, increased sales, and an improved image.
The risks, on the other hand, include:
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The management has an impact on decision-making*
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The communication might not be as effective as within the company*
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Loss of control over some of the issues*
*As per The Balance Small Business (Delaney, 2019).
Profitability Ratios
The profitability ratios are used to assess a businesss financial condition, which includes the operating costs, revenue, balance sheet assets, and other measures of accounting. These ratios are vital in creating reports for the shareholders and, hence, are used by most, if not all, companies. In the case of a potential strategic alliance, the profitability ratios of both companies would be used in the negotiations.
Decision Matrix
A decision matrix helps with business decision-making by providing a more objective tool for the evaluation of the choices. When choosing alternative strategies, a decision matrix can be very helpful. However, when used to predict risks, it will not be as effective. Risk prediction is a relatively objective question already, so using a decision matrix would be redundant. On the other hand, using a decision matrix for managing the risks would be beneficial.
Risk Matrix
A risk matrix is used during risk assessment in order to determine the levels of risk and prioritize them for the most efficient risk management. The layout of the matrix and the use of colors to convey the different levels make the tool easy to use. The risk matrix minimizes the potential damages and facilitates crisis control. Furthermore, it is completely objective and can be used in most situations.
Out of the strategic alternatives discussed for Martha Stewart Living, the investment into the social media exposure is the most viable solution to its current issues. If the strategy works, the company will be raised in the market and will increase its profits. However, there are numerous risks associated with this alternative, including:
Although all of these risks are potentially detrimental to the company, some are more damaging than others, such as account hacking, loss of sensitive data, and compliance violations. If there is a breach of sensitive data, this might be a massive problem for the company and its shareholders. However, with proper cyber security, this should be avoidable. Secondly, damage to the reputation of the brand due to misuse of social media by the company is even more damaging. In the world of cancel culture, it is necessary to be incredibly careful with self-expression on the Internet. Lastly, the psychological effect of getting negative feedback on social media can be very difficult on the mental health of human resources. Although training can be done to help staff deal with the negative comments, it is not always avoidable and is almost expected.
References
Delaney, L. (2019). Advantages and Disadvantages of Global Strategic Alliances. The Balance Small Business. Web.
Stewart, B. (2019). The Importance of Customer Loyalty. Emarsys.
Teeboom, L. (2019). Examples of Strategic Alternatives. Chron.
10 Ways Your Firm Can Benefit from a Strategic Alliance. (2020). PSMJ Resources.
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