Business Strategy of Local Television in the UK

8/3/2019 Business Strategy of Local Television in the UK

http://slidepdf.com/reader/full/business-strategy-of-local-television-in-the-uk 1/53



i

Abstract

There has been some interest in the field of strategic management in broadcasting, but

little attention has been given to local television broadcasters. Therefore, I tackled the

issue of business strategy of local television stations in the UK. The system discussed in

this project is a hypothetical adaption of one that does exist in the US. Organisations like

United for Local Television, along with Jeremy Hunt, Minister of Culture, Olympics,

Media and Sport, have raised considerable interest in developing a sustainable local

television system. I have set out to present pertinent information about the strategic

positioning and the development of strategy for these potential local television stations. I

have used previous studies to structure my argument and present useful data thatcontributes to the discussion. Data was collected from government reports concerning

local television in the UK, as well as, case study materials- collected through interviews

and other reports- from nations with strong local television systems. The results yield two

models that managers can apply in order to develop their strategic position and create

strategic goals and actionable timelines for their organisation.



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Attestation

1. This work is composed by me.

2. This work has not been accepted in any previous application for a degree.

3. The work of which this is a part is done by me.4. All verbatim extracts have been distinguished by quotation marks and the sources of

information have been specifically acknowledged.

5. The word count for this work, excluding appendices and bibliography, is 12,978

I understand the nature of plagiarism, and I am aware of the University’s policy on this.

I certify that this dissertation reports original work by me during my University project

except for the following:

The model discussed in the literature review in Chapter 1 and included in Appendix 2, Figure

2.1, was taken from Chan-Olmsted’s Issues in Strategic Management (2006, p. 176). The models discussed in Chapter 3 and included in Appendix 3, Figures 3.1, 3.2 and 3.3,

respectively, were taken from Porter’s The Five Competitive Forces that Shape Strategy

(2008, p. 80), Lewis and Lawton’s The Four Functions of Organizations--Where does the

individual fit in?(1996, p. 222) and Schein’s Cultural Model, found in found in Küng-

Shankleman’s Inside the BBC and CNN : managing media organisations (2000, p. 20).

The model discussed in Chapter 4 and included in Appendix 4, Figure 4.1, was taken from

Chan-Olmsted’s Issues in Strategic Management (2006, p. 175). Signature:

Registration No.: 1919502

Date:



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Acknowledgements

I would like to thank my advisor, John Izod, for the guidance and perspective he provided

throughout the development and completion of this project. His constructive advice hascontributed a great deal to my work. It was a privilege to interview local station managers in

the US, and I owe sincere thankfulness to them for their thought provoking observations. I

would also like to thank my classmate, Jördis Güther, for continually challenging me to re-

assess the focus and structure of my dissertation. I am thankful and indebted to my good

friend and former colleague, Andrew Busam, for providing feedback and support.

Additionally, I would like to thank, Neil Blain, for helping me brainstorm and focus my

research. I would be remiss if I did not mention and thank my former employers, Herbert

Greenberg and Sandra Smith, whose passion for local television and continued support has

been an inspiration to me. Last, but certainly not least, I owe a great deal of gratitude to my

family for encouraging and supporting me through my many endeavours.



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Table of Contents

Abstract ...................................................................................................................... i

Attestation ................................................................................................................. ii

Acknowledgements .................................................................................................. iii

Table of Contents ..................................................................................................... iv

Introduction ............................................................................................................... 1

1 Literature Review ................................................................................................... 3

1.1 Media Market, Scarcity and Strategy .............................................................. 3

1.2 The Local Market ............................................................................................ 6

1.3 Defining Local ................................................................................................. 7

2 Research Methods ................................................................................................. 9

3 An Overview of Strategy ...................................................................................... 13

3.1 Defining Strategy ........................................................................................... 13

3.2 Models for Strategic Planning ....................................................................... 14

3.3 Organisational Structure ................................................................................ 15

3.4 Resources ....................................................................................................... 16

3.5 Core Competencies ........................................................................................ 16

4 Strategy and Broadcasting .................................................................................... 19

4.1 Developing Strategy ...................................................................................... 19

4.2 The New Media Market ................................................................................. 20

4.3 Resources and Diversification ....................................................................... 21

5 Strategy in Local Television in the UK ................................................................ 25

5.1 Need for Local ............................................................................................... 25

5.2 The Shott Report ............................................................................................ 26

5.3 Case Studies ................................................................................................... 28

5.3.1 Local Television in the US .................................................................. 28

5.3.2 Tawain Satellite Companies ................................................................ 31

5.3.3 Local Television in Basque country, Spain ......................................... 32

5.4 Strategies for Local Broadcasters .................................................................. 33

Conclusion ........................................................................................................... 35

Reference List ......................................................................................................... 36

Appendix 1 .............................................................................................................. 412.1 Strategy Map by Chan-Olmsted .................................................................... 41



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Appendix 2 .............................................................................................................. 42

3.1 Five Forces Framework by Porter ................................................................. 42

3.2 Organisational Functions by Lewis and Lawton ........................................... 43

3.3 Culture, Strategy and Environment by Schein .............................................. 44

Appendix 3 .............................................................................................................. 45

4.1 Media Taxonomy by Chan-Olmsted .............................................................. 45

Appendix 4 .............................................................................................................. 46

5.1 Determining Strategic Position ...................................................................... 46

5.2 Firm-Level Strategy ....................................................................................... 47



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Introduction

There has been renewed interest in developing a local television system in the UK.

Jeremy Hunt, Secretary of State for Culture, Olympics, Media and Sport, has led the drive to

develop a new and sustainable local system. The recently published Shott Report discusses

the viability of local commercial television which will provide services to ten different

markets in the UK. Previous attempts to establish local television have fallen before they

could take off, or the organisations were unable to develop appropriate models to sustain the

venture (Department of Culture, Media and Sport 2011,p.13). Cost, lack of interest and

commitment to public-service are a few reasons why local television has had trouble in the

UK. The Shott Report presents its answers to these issues, but a gap still exists between the

answers and the solutions to the problems of local television. Many of the issues can be

managed if appropriate techniques are applied. Business strategy addresses resource

management and the development of long-term goals that considers internal and external

competitive forces that an organisation will face (Porter 1979,p.137). Renewed interest in

local media will not relegate the issues previously faced. However, a commitment to

business strategy will prepare managers and organisations to better deal with these issues and

build sustainable local television operations.

This project addresses some strategic decisions local station managers might consider

in order to build successful media organisations. Data has been collected from a government

sponsored report that discusses the viability of local television in the UK, as well as

information collected from cases in the USA, Taiwan and Spain.

The literature review, in chapter one, presents previous studies and themes that

contributed to the development of this project. I discuss the influence of media economics by

focusing on the unique characteristics of the media industry and the need to develop

strategies that account for these elements. However, much of the material does not addresslocal economic characteristics. In order to address this, the review moves on to discuss some

firm-level strategies, as well as cultural considerations that can affect local media systems.

Additionally, I discuss important business strategy materials that provide vital framework

materials for the data presented later.

In chapter two, I layout my research methods and discuss how I collect and present

data. I focus primarily on how I collected materials from the Shott Report and compared the

information to the data from the case studies. I have carried out interviews with station



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managers in the USA, and I use this chapter to address my selection of managers, markets

and their application to this project. Furthermore, I discuss some of the variables and

limitations of my approach.

Chapter three highlights strategic models and structures used to create a strategic

assessment for this project. This chapter presents a definition for local media strategy. I also

use this chapter to discuss elements of an organisation that contribute to the development of

strategy. This chapter does not address local media strategy, but the information presented in

this chapter will move the discussion towards specific strategic devices that can be applied to

the broadcasting industry.

Chapter four will draw from existing studies and literature to highlight the

characteristics of strategic management in broadcasting. This chapter addresses shifts in

market power, technological capabilities and resource allocation and discusses how they have

transformed the media industry. Furthermore, I look at how these elements affect strategy.

This chapter leads our discussion to our main section of analysis concerning strategic

management at the local level in the UK.

Chapter five utilises the data from the Shott Report and the case studies to develop the

premise of this project. This chapter combines the material from previous chapters, as well

as data from the report and case studies, to present a model for strategic positioning and for

developing firm-level strategies. The strategic positioning model is designed specifically for

the local system in the UK. The composition of a firm’s strategic position- along with their

competencies, competitive advantage and long term goals- form the basis of a local

broadcaster’s strategy. The material presented here can be used by managers to develop

strategies for their organisation.



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Chapter One: Literature Review

The objective of this literature review is to present some primary sources used to

develop the theoretical framework around strategic management of local television. A main

theme throughout this project is the interconnectivity of the television medium in academicand professional fields. Although this project focuses on a specific sector of the media, we

widen our approach to gain insight from other industries and apply business principles that

may be transferable or modified to fit our setting. It is important to note, incorporation of the

different approaches was found to be necessary to understand the complexity of local

television. Reliance on business or economic theory alone would not supply us with the

proper structure to identify trends and themes within the industry, nor provide adequate

academic knowledge.

There has been extensive work in the field of media economics to explicate economic

principles that govern the media (Picard 1989, Doyle 2002, Albarran 2006 and Einstein

2004). However, many of these works are fit for application within globalised markets. This

project is concerned with the economics of local television and cannot justify the application

of some of economic principles without assessing the potential harm it would cause local

stations.

In this chapter I have set out to identify the theoretical concepts that are interwoven

throughout this project. Mainly our focus will be in and around the economics of television

and strategic management of media firms. There has been interest in building a

commercially viable local broadcast system in the UK. I have set out to address some issues

local stations will face and how managers can develop strategies to stay competitive and

sustainable. I will discuss key contributions to strategic management and media economics

then some of the unique characteristics of local media systems.

1.1 Media Market, Scarcity and Strategy The traditional approach to media economics has been concerned with the dual-

product nature of media products (Albarran 2010, Napoli 2003, Picard 1989). Broadcasters

manage programming, audience, and distribution markets concurrently. The ability to

capture the audience will determine the levels of success and control a broadcaster has in a

market (Napoli 2003). However, this approach does not account for public service

broadcasting. PSB is based on responsible broadcasting that provides important information

services to the citizens it serves. The BBC is a highly regarded and easily recognisable PSB



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and has shaped the television system in the UK since its creation (Curran and Seaton

2010,pp.105-107). Aldridge discusses some of the issues around a market driven broadcast

system and those of a PSB system (2007). In comparison, local broadcast systems in the US

have been successfully working in a market driven system for decades. However, there are

concerns over this type of system in the UK (Aldridge 2007,p.79). Aldridge analysis of the

UK broadcast system sheds some light on the historical and current problems a local system

in the UK would face. Her work provides useful framework for understanding the issues a

commercially driven local system would encounter.

Christophers (2009,pp.10-14) asserts that ‘artificial scarcity’ must be created in order

to control the availability and reproducibility of public goods. Consumption of public goods

by one person does not affect the availability of consumption by another person. Once a

public good is produced and put into the market, in theory, it can be consumed infinitely

without affecting the scarcity of the resource. Television programmes are naturally public

goods. Therefore, principles of scarcity and supply and demand do not naturally occur.

Exploiting the potential value of these resources is difficult without market or regulatory

intervention that creates scarcity. Copyright laws are the most recognisable forms of

artificial scarcity (Christophers 2009,p.10-12). Garnham lays out four strategies to create

artificial scarcity: control of distribution, selling the audience and their attention, hardware

provision, and creation of content that requires constant re-consumption and are used to

commoditise products and realise their potential value (1987, p.30). Garnham asserts that

audience maximisation is the best way to achieve profit maximisation (1987, p.30). With

high investment costs, television programmers often look to exploit the economies of scale

and scope to attract new audiences. His research highlights one of the major economic

concerns for local television that local programmers are not necessarily focused on expansion

into new geographic markets. This raises questions about the perceived value, investment

potential and profit strategies that are necessary for a local television station to be successful.

However, scarcity driven marketing and economic planning does not address the main

challenges for local broadcasters. The landscape of today’s local market is marked by

technological changes, consumer power and brand value. Managers must address these, plus

many other challenges that go beyond the scope of traditional economics. Strategic

management helps develop systems to manage and promote growth throughout the entire

organisation. Business strategy provides the framework for managers to address the multi-

faceted issues, from economics to human capital, in a highly competitive marketplace.



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Sanchez-Tabernero and Carvajal provide a summarised overview of strategic activity,

they say, “strategy always involves establishing priorities, backing some objectives, at the

expense of others” (2002,p.1). They go on to argue that strategy is concerned with decisions

about the direction and focus of an organisation, based on internal and external forces.

Growth potential and resource availability are factors that drive strategic decisions. They

explain some of the risks that come with strategic management. They claim that strategy is

associated with growth activities; without proper management, strategic growth can cause a

firm to lose focus on specialised services and may result in production inefficiencies

(Sanchez-Tabernero and Carvajal 2002, pp.2-3). However, strategic growth can decrease

disadvantages associated with smaller firms and strengthen a group’s position through

diversification tactics (2002, p.4). Traditional media has had to diversify and expand their

products due to the influx of new media and a shift in market power from the producers to the

consumers. Sanchez-Tabernero and Carvajal, help identify some of the qualities of strategic

choices and is useful in developing generic strategic frameworks that can be applied to media

organisations.

Porter’s Five Forces that shape competitive strategy (Porter 2008) works well as a

complement to Sanchez-Tabernero and Carvajal’s assessment of strategic activity. Porter’s

seminal work on the forces that affect rivalry has been a mainstay in economic and strategic

literature for the past decade. He identifies the five forces that determine the competitiveness

of an industry. This is a useful strategic device in assessing market elasticity and potential of

specific firms. Understanding external and global marketplace helps local media

organisations define their roles and strategic position in the markets. This positioning can

lead to specific tasks that will help them establish and maintain their place in local and

regional markets. Porter’s work is useful within local markets as local economic conditions

and levels of competition are different from national and global trends.

Chan-Olmstead explores strategic management in detail. Her analysis covers the brief

history of the subject and how strategy is applied in today’s media economy. I found her

strategy map- about the formulation and implementation of strategy- very helpful in outlining

some of the main concerns within local television (Figure 2.1). Chan-Olmstead argues that

strategy is not concerned with the creation of scarcity, but rather, with resource alignment

within the firm (2006, p.164). Strategic management is mostly concerned with resource

management and the alignment of resources between and across departments within an

organisation. Barney (1991) and Das & Teng (2000) define resource alignment as accessing



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resources not currently available but necessary for a firm to maintain or establish competitive

advantage. Chan-Olmstead argues that the benefits of resource alignment are motivational

factors that drive firms to diversify their product, whether it be in geographic or product

markets (2006, p.174). She goes on to say that, “the dependency on local

communication/media infrastructure may also lead to a strategy that is geographically

related” (Chan-Olmsted 2006, p.174). For our task, this resource alignment plays an

important part in the strategic decisions of a local station.

1.2 The Local Market

Aldridge’s work, Understanding Local Media, has been an important resource for my

research. She provides a broad overview of the different elements that make up local media

in the UK. Her research into the local and regional press has been useful in helping develop

frameworks for my research focus. She addresses some of the issues around academic

research into local media. Aldridge asserts that academics in the UK are caught up in

international flows and pressures to maintain recognition at a global level (2007, p.7-13).

Research has reflected this drive towards global recognition. Part of this ‘preoccupation’

with internationalism in academic research, may be a result of a non-borders lifestyle (2007,

p.7). Academics tend to think and live globally and their research reflects this trend.

However, as argued by Aldridge, most people live locally (2007, p.8). It is interesting that

scholars have tended to boil down globalisation and the international flow of

communications, and have developed measures for working in those markets. She covers

many of the important issues around local media including culture, management, and

economics. Her work is not all-encompassing but does provide significant information about

local media.

The academic work around localism highlights the complexity and dynamic nature of

community spheres (Paranjape 2007, Kavoori 2007, Oberholzer-Gee and Waldfogel 2006).Aldridge pulls from the Future Foundation Report, which asserts that people create regions

through their interactions with the ‘people, places, and activities’ around them (Aldridge

2007, p.10). Therefore people’s interaction with media will be a dominant force in

developing their perceptions of their community. Local media orients consumers to the

activities of people within the same geographical spheres. At the local level, programmers

depend on the community to drive content interests. (Paranjape 2007, p.462). This



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orientation creates an attachment to the community and media organisation. Local broadcast

strategy should consider the implications of these local interactions.

1.3 Defining Local

One of the tasks of this project is to define the parameters of locality. What is

considered local, and how do we assess the local qualities of a large market versus those of a

small market? Additionally, where are geographic lines drawn and how far does local

television reach? The range of locality, from national to ultra-local, will have direct impact

on economic capabilities of a broadcaster. How a broadcaster defines their operation and

how trading partners view their organisation will have a significant impact on their ability to

create and exploit product potential. However, technological advances in DBS and internet

transmission has eliminated many of traditional spatial boundaries associated with terrestrial

broadcasting (Albarran 2010, p.86). The economic impact of technology and exploitation of

economies scale and scope has created pressure on smaller media firms to diversify their

products and expand their reach (Christophers 2009, p.76). New definitions of localism are

concerned with the cultural boundaries rather than spatial boundaries.

Kavoori defines localism, as it relates to internationalism, as a set of standards that

has evolved out of global trends (2007, p.295). In Kavoori’s opinion, local has been

portrayed in contradictory ways either, “as a residual category overtaken by development, as

a haven of resistance against globalization, or as a historical or cultural context” (2007,

p.295). The conceptual breakdown of localism is shown by Kavoori, to create a gap between

global perspectives and local knowledge (2007, p.297). The intricate and multi-layered

dimensions of local are left out of the mainstream flows of communication at global levels,

which is eventually reflected through local symbols in a community (2007, p.297). Global

products are developed and packaged to meet expectations of a global audience. These

products lack cultural symbols and definition that define regions and nations. Local flows of communication create and transmit local culture, which has become an important part of

communities in maintaining cultural identity in a seemingly borderless world. Kavoori

provides a contextual assessment of the assumptions about localism. Her work shows that an

evaluation must draw upon the complexities within the area of analysis. However, her focus

revolves around redefining the culture of localism and its application to globalisation. She is

not concerned with spatial boundaries of localism. Dependency on Karvooi’s analysis alone

may leave our definition of localism lacking the economic foundations and geographic



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specifications that separate the local television economy from the global industry. The

cultural implications highlight the importance of local media systems. However, we must

consider spatial and economic implications, as well as cultural assertions in order to develop

appropriate strategies for local media firms.

Paranjape goes further arguing that local television is defined in the meaning and

‘dynamism’ created that sustains local culture (2007, p.460). Her work asserts local

television is dependent on geographic scope and on the reflection of locality in which the

local station is situated (2007, pp.459-463). Paranjape claims, “in a globalised world

increasingly dominated by ready-made images, people easily fall prey to the ‘options’

produced by some propaganda machinery” (2007, p.461). Local media is defined by its

ability to communicate with and be a part of the community. Global media feeds people

information and ideas about the world outside of their local spheres. Local television is a

system that can reflect and respond to the fluctuations within the community. Differing from

imported media, local television is able to actively adjust to the dynamic culture in the

community (Paranjape 2007, p.462).

Although Paranjape does not discuss economic implications of a dynamic culture, her

work highlights the importance of local culture. There is a clear need for local media systems

to sustain these cultures in an increasingly globalised world. Cultural implications are

significant, and local media plays an important role in developing and maintaining local

culture. Reviewing these issues led me to develop the ideas presented in this project. The

resurgence of interest in local broadcasting in the UK calls for a fresh look at the industry;

local media is lacking an assessment of firm-level actions. I have used the information in this

literature review to develop a research paradigm to produce strategic models for a local

broadcast system in the UK.



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Chapter Two: Research Methods This chapter is focused on identifying the methodologies used to define and identify

management principles of local television in the UK. These methods have been used to plan,

develop and carry out specific tasks designed to provide data and supporting information,which will contribute to the topic and field of study. I will justify my approach by explaining

how these methods have been formulated to fit this project. Furthermore, I will address some

of limitations of my research and some different variables on the outcome. Qualitative

research is the main type of research used. The information available through government

and industry reports and inquiries into other local media systems provides a wide range of

issues and topics for us to build a case for local media in the UK. Some of the findings are

based on data collected from local television station managers in the USA. I will explain

how I collected this information and its application to the rest of the project.

Data collection and processing can be a time consuming, confusing and frustrating

element of any research project. Choosing how one should collect information is only the

start of a process, which must be planned from the outset and modified as the project

develops. Determining what questions to ask, how to ask them and how to pick out

applicable information requires in-depth knowledge of the subject and a clear vision of

project outcomes. The focus and argument presented in any work is based on the evidence

and support found during this process. Therefore, one must spend a considerable amount of

time developing a research strategy that will yield the most accurate results. Much of the

theoretical framework presented in this project, comes from existing literature on media

economics and strategic management. The task of identifying issues within the local media

comes from government reports about the local media. These reports will help address the

main concerns around local media in the UK. The framework theories help determine what

approaches are applicable and acceptable for UK media.

The best way to answer the questions of this project was to uncover the unique issues

and themes within the UK’s local broadcasting system. With a recent surge in interest, new

reports and analysis have been published that assess the UK’s broadcasting environment.

This new information allowed me to define some of limitations of the system, but also, let me

address the economic structure of the industry. These reports gave me a clear picture of the

economic structure of the local broadcast system in the UK. The bulk of my work is

concerned with identifying strategic techniques and devices that are applicable and necessary

for the successful operation and sustainability of local television. The topic will be addressed



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using a three step process to: give an overview of relevant strategic literature, discuss strategy

within broadcast system, and develop strategic positioning and action models for the local

system in the UK.

The issues with this type of research and data collection are concerned with the bias

of the researcher. Although the research questions are clear, the researcher may fail to

recognise shifts or alternative approaches presented within the data. This means that the data

may move the discussion in a different direction, but the researcher may fail to recognise or

accept the alternative discourse. This can create a theoretical gap and leave findings lacking

proper support. It is imperative that the researcher compare information from the reports

with the theoretical information and work hard to rule out any personal bias that may stall the

discussion.

One main issues around the local broadcast system in the UK is the lack of truly local

television. It was difficult to find relevant material that contributed directly to strategic

management from a UK perspective. In order to overcome this lack of evidence, I collected

additional materials from three different nations to create a comparison to draw some

conclusions. The challenge with presenting information from other systems comes from the

regulatory structures and cultural trends that make each system unique. In order to address

these limitations, I have carried out additional research to provide grounding and support for

the data collected from the Shott report.

I carried out telephone interviews, which were designed to reinforce the qualitative

research and highlight practical management techniques of successful managers from stations

in the US. I conducted a total of five interviews and have included materials from three of

those interviews in this project. Two of the interviews were left out of the findings as the

information was irrelevant to the discussion. I have selected two similar markets based on

size and number of local stations within the market. Market size is determined by Nielsen

market research and the stations in this report are ranked between 25 and 50 in the US

system. There are between 700,000 and 1.3 million homes in each market — roughly 1

million to 2.5 million people (Nielsen 2010). These market numbers are similar to the market

size of potential local stations in the UK, as presented in the Shott Report. I have set out to

identify trends and themes and will present the results as a case study, which prioritises their

importance in relation to the research topic. Many strategies and economic characteristics in

the local broadcast system in the US can be applied to the local UK system. One of the

respondents asked to be kept anonymous so the interviewees have been labelled as STM1,



11

STM2 and STM3. Information concerning names and organisations for the other two

interviewees can be found in the reference list.

STM 1 operates in the Greensboro-High Point-Winston Salem market in the state of

North Carolina. This station is located in the city of Winston Salem (population 230,000),

but provides news coverage for the whole market. They compete with two other local

stations, which offer similar news and advertising products and are located in Greensboro

(population 270,000) and High Point (population 115,000) respectively. STM1 has been in

television for 40 years, and has been the general manager of the Winston-Salem based station

for nearly a decade. STM 2 manages a station in the Raleigh-Durham market, which covers

an area reaching approximately 1.1 million homes in North Carolina. The station provides

local and regional news coverage, as well as local and national spot advertising opportunities-

and competes with three other local television stations that offer similar services. STM 2 has

been in management at other stations around the country for over a decade- and has been at

this current post for two years. STM 3 also manages a station in the Raleigh-Durham

television market. This manager is unique in that she has been at her post for eight years but

brought little outside experience to job. Instead, she has spent the entirety of her television

career at this one station. She has worked up into the position.

The interviews and case studies present a unique challenge for this project. The main

goal is to gain knowledge about strategies, techniques and methods used to manage internal

resources and adapt to external forces around their organisation. Some of the issues- raised in

the interviews- revolve around very specific management and economic concepts. Many of

the interviewees did not use academic terminology or definitions to explain why and how

different methods work. In order to overcome this, the questions were formatted- to the best

of my knowledge- to reflect professional terminology and phrases that still maintain their

academic application.

Additionally, I have included case studies from Taiwan and Basque country, Spain.

This information helped identify common trends amongst local broadcasters across national

boundaries, as well as characteristics unique to each system. The Taiwanese case study

looked at competitive strategies in a market driven satellite broadcast system. The case from

the Basque country addressed the balance between market driven and public-service oriented

local television. These two cases are different in their structure and approach to local

strategies but provide a unique cross-dimensional mix of ideas, which have been applied to

this project.



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However, there are a number of limitations with this comparative analysis. Legal and

economic conditions around television are drastically different from country to country.

These differences, if left unexplained, create a theoretical breakdown that fails to highlight

the uniqueness of the different broadcast systems. In order to explain these differences, I

have tried to take each system and draw out similarities and transferable elements

respectively. The Shott Report was used to identify characteristics in the UK system. These

characteristics were compared to material from the case studies. Elements that matched were

used to develop the ideas presented in this project.

This chapter outlined the methods used as the primary mode of data collection.

Information obtained through reports will be applied to existing frameworks and processed to

support the discussion. Supplemental support is provided through comparative data from

interviews with local television station managers in the US and case studies from broadcast

systems of Taiwan and Basque country. Some limitations include the differences in

television systems and markets from country to country. However, the different systems

give us a multi-dimensional assessment of the strategic actions at the local level. The results

from these different cases provide the basis for this project. This methodology uncovers

some key strategic management issues with local broadcasting in the UK.



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Chapter Three: An Overview of Strategy This project is focused on providing information designed to further the discussion

concerning commercially viable local television in the UK- specifically looking at the role of

business strategy within this system and its application at the local level. There are a widerange of approaches proposed by management and strategy by scholars that can be utilised to

fit the local broadcasting sector. The literature review covered some contributions to the field

of strategic management. This chapter focuses on specific models, definitions and strategic

tools applied and used in this study. I will focus on organisational function, structure,

resources and core competencies; then explain their contribution to strategy development

within an organisation. I highlight the strategic models and structures used to create a

strategic assessment for this project. Information presented in this chapter will move the

discussion towards specific strategic devices that can be applied to the broadcasting industry.

3.1 Defining Strategy

Before this discussion can move on to highlight the factors used for this project, there

needs to be a definition of strategy as it applies to this research. Some scholars have

proposed definitions of strategy that are broad in scope and provide generic solutions to

common market driven problems (Porter 1999, Ansoff 1965). For example, the Ashridge

mission model defines strategy simply as a firm’s competitive position and their distinctive

competencies (Campbell and Yeung 1999, p.287). Distelzweig and Clark claim that strategy

is a road map from a current position to a future position (2006 p.837). While these

definitions paint a picture of what strategy does, they fail to deliver clear solutions that

organisations can apply to specific organisational areas and problems.

Another group of scholars have tailored their definitions of strategy to fit specific

market segments (Sanchez-Tabernero and Carvajel 2002, Chan-Olmsted 2006, Mai 2002).

For example, Chandler, an early strategy scholar, says that strategy is, “the determination of

basic long term goals and objectives of an enterprise, and the adoption of courses of action

and the allocation of resources necessary for those goals” (1962, p.13). Definitions, although

useful, must be weighed against other factors and applied as part of a larger strategic

framework. I have pulled characteristics from a different range of strategic theories in order

to present a definition that encompasses aspects of the media industry tailored to fit locally

managed firms.



14

Strategy balances internal assets with the external environment to determine the long term

planning and prioritisation of an organisation’s resources and duties and their application to

the markets that firm serves.

3.2 Models for Strategic Planning

“The implementation of strategic planning tools serves a variety of purposes in firms,

including the clear definition of an organization’s purpose and mission, and the

establishment of a standard base from which progress can be measured and future

actions can be planned” (Mayo 2006, p.837).

Porter’s seminal work on strategy and competition is often referenced and utilised to

assess market variables and a firm’s strategic capabilities based on those factors. Porter’s

Five Competitive Forces framework is particularly useful and can be used to plan strategy

and assess a firm’s potential in an industry. This framework helps determine the intensity of

competition within a market by evaluating the five factors that influence levels of

competition. The five forces are: potential entrants, buyers, suppliers, and substitutes- which

combine make up the fifth force of overall competition (Figure 3.1 models Porter’s Five

Forces). This assessment can help firms: identify threats, map their position in the market,

and assess overall competitiveness between firms (Mayo 2006, p.836). The model is useful

because it is transferable across many different industries and firms of varying sizes.

Another planning device that can be used in conjunction with Porter’s Five Forces is a

SWOT analysis. The SWOT analysis is a generic planning tool that can be applied across a

wide range of organisations and highlights a firm’s internal strengths and weaknesses, as well

as their external opportunities and threats. Panagiotou says that organisations operate in an

environment of uncertainty and complex market conditions, and understanding that

environment is essential for strategic planning (2003, p.8). A good SWOT analysis considers

implications of environmental factors and their impact on the organisation. Threats to a firm

may not require any intervention, and strengths may be dependent on external forces, which

an intervention may disrupt. An internal strength may lose its value and become a weakness

if it is not evaluated and managed appropriately. The SWOT analysis aims to exploit external



15

opportunities by utilising a firm’s internal strengths, and minimise the risk of threats and

impact of weaknesses (Panagiotou 2003, p.8).

The planning process is an important step for strategic development, as it provides a

useful benchmark for strategic assessments in the future. Managers must select the

appropriate tools to assess their current market position, benchmark their performance and

develop appropriate strategic actions to meet long term goals. Planning tools like Porter’s

Five Forces framework and the SWOT analysis allow organisations to chart their position

and benchmark performance.

3.3 Organisational Structure

The function or purpose of an organisation is a major factor in determining the

strategic direction managers develop and implement. An organisation’s purpose drives a

manager’s decisions concerning resource allocation, distribution, market entry, customer

care, financial resources and human capital. These elements and decisions naturally define

an organisation’s structure and culture. When developing a strategy, managers must

understand the functions and culture that govern the organisation. Strategies that change or

alter this structure can affect the balance and natural grouping of a firm. Models have been

developed to help firms assess culture and structure without disrupting them.

I will use the Organizational Functions model, as presented by Lewis and Lawton, to

assess the functions of an organisation and how these functions depend on the industry in

which a firm operates. Moreover, organisational culture affects the structure and strategic

actions of a firm. Managers should be aware of the underlying cultural assumptions that will

affect a firm’s strategy. Schein’s Model of Organizational Culture highlights the importance

of cultural elements and their impact on organisational strategy.

There are four generic functions, presented by Lewis and Lawton, which an

organisation must carry out to be successful: performing goal oriented tasks, management of their environment, keeping people working together and establishing ways to deal with

outsiders (1996, p.223). These functions must be performed in tandem, and in order to

succeed, an organisation must meet a minimum standard of quality for each category.

However, the tasks, resources and standards applied to each category depend on the type of

organisation. Lewis and Lawton developed the Organizational Functions model to classify

firms based on their activities and where they may fall in relation to each category (See

Figure 3.2). Their model highlights different elements that firms can focus on, depending on



16

the markets and customers they serve. Managers can use this analysis to create a profile of

their firm and identify basic goals and tasks, which are necessary for survival in an industry.

This analysis is a useful tool in the strategic positioning process.

Additionally, there is a strong relationship between the structure and culture of an

organisation. Schein asserts that culture is made up of underlying assumptions that relate to

an organisation’s functions; these assumptions drive strategic activity (found in Kung-

Shankelman 2000,p.15). Kung-Shankelman says, “culture, therefore, plays and important

role in determining firstly how environmental developments are perceived by members of an

organisation, and secondly how members of the organisation react to the strategies designed

to respond to those environmental developments” (2000, p.16). Figure 3.3 is Schein’s model

designed and tested to understand culture and how it relates to strategy.

3.4 Resources

Resources are a crucial element of a firm’s structure. Resources form the product and

service lines of a firm. They are the main source of value for an organisation. Managers are

tasked with controlling and distributing these resources within and across different segments

of the organisation (Porter 1999, p.88). Broadly speaking, resources can be put into one of

two categories: tangible or intangible resources. Tangible resources are the observable and

quantifiable assets of a firm; they are physical assets like property and equipment (Hitt,

Ireland, Hoskisson 2007, p.79). Intangible resources are unique, knowledge based assets of

each organisation and are difficult to monetise; brand value and inimitable skills are

examples of intangible resources (Landers and Chan-Olmsted 2004, pp.6,10). Physical and

knowledge based resources are complementary forces that require cross-directional

management and co-ordination. Strategic planning requires firms to choose which types of

assets they will build competitive advantages around. In a highly competitive industry, with

many substitutes, competitive advantage develops when specialisation in a product or serviceemerges (Porter 1980, p.50-51). These advantages can be developed into long-term core

competencies.

3.5 Core Competencies

Development of strategy can be a long process. Managers need to forecast growth

potential, risks and environmental factors that may not exist now- but may drive the industry

in the future. They must also identify, enhance and co-ordinate unique elements and

activities within their organisation that create their competitive advantage. Prahalad and



17

Hamel have termed these sources of competitive advantage core competencies (1999, p.221).

Core competencies focus on inter-organisational relationships between individuals, groups

and equipment used to carry out tasks. Work flow processes, application of technology and

resource management build a set of skills that can be turned into competitive advantages

through unique products and services. Developing and growing core competencies requires

careful synchronisation of communication and a commitment to team work across

administrative boundaries (Prahalad and Hamel 1999, p.221). Hitt, Ireland, and Hoskisson

claim that core competencies are one of a firm’s most important sources of competitive

advantage and should drive strategy formulation (2007, p.77).

Strategies are developed to drive performance and growth over a long period of time.

Current skills or products may be obsolete in the future. Failure to develop sustainable core

competencies will result in strategic mismanagement and a loss in market position (Prahalad

and Hamel 1999, p.225). Therefore, not all capabilities or competitive advantages can be

turned into core competencies. As a result, strategists and managers need to separate current

capabilities to identify and develop a firm’s core competencies that will drive them into the

future. Prahalad and Hamel provide an assessment for how these competencies can be

identified. They show that multi-market access, benefits for the end user and difficulty to

imitate are elements of capabilities that can be developed into core competencies (1999,

pp.224-230). Managers should build competencies based on these characteristics.

Sustainability is another important factor when considering strategic action- and core

competencies must be developed as sustainable, long term strategic devices. Hitt, Ireland,

and Hoskisson have identified four characteristics of sustainable competencies. They show

that value, rarity, costs to imitate and non-substitutability contribute to the profile of

successful and sustainable core competencies (2007, pp.85-87).

Cannon makes a case for management development and training as a core

competency (1996, p.277-279). He argues that highly competitive, business driven markets

are crowded with similar property based assets and brands. Competencies based on physical

resources will leave a firm lacking clear competitive advantages. Markets driven by

technology are highly volatile and physical resources are easy to imitate and therefore not

sustainable. Instead, firms should commit to hiring and training managers of excellence

(Cannon 1996, p.281). Competitive advantage comes from quality of work, commitment to a

firm and experience these management groups have attained (Cannon 1996, pp.280-287).

This focus on intangible resources and human capabilities highlights an important element in



18

strategy formulation and firms should consider how they manage and promote the intangible

assets of their organisation.

Core competencies must be developed and managed carefully in order to promote

growth. These tools of competitive advantage are built from a firm’s internal resources. As

we have seen, these resources are based either on tangible properties or intangible assets.

Strategic direction is dependent on the development of these competencies. Managers must

choose to focus development either on intangible resources or tangible ones. The direction

chosen is dependent on market structure and the functions of the organisation. Core

competencies are not short-term solutions to resource based problems. Rather, they are

strategic devices that drive the future potential of a firm.



19

Chapter Four: Strategy and Broadcasting In chapter three, I analysed some important features and models of strategy planning

and formulation. The material presented is important for this project. Chapter four narrows

this strategy research to focus on the broadcasting industry. This chapter will draw fromexisting studies and literature to highlight the characteristics of strategic management in

broadcasting. This information will lead the discussion to our main section of analysis

concerning strategic management at the local level in the UK.

Most research about media economics looks at the normative elements of the industry

as a whole (Albarran 2006, Becker et al. 2009, Picard 1989). This research has shown the

importance of media economics as a field of study- but has been limited to cumulative

analysis of networks and trends across hundreds of firms. However, the firms and

organisations, which comprise the industry, differ in size, structure and purpose. These

differences can limit the focus of research. This writer does not contend that previous

research has been insufficient or lacking, but rather, a need exists to explore media economics

within specific segments of the market. Strategic media management addresses external and

internal influences of an organisation’s strategic actions (Picard 2004, pp.1-4). Strategic

management allows us to apply economic characteristics, unique to the media, to individual

or clustered firms to assess how these firms operate. In turn, results yield information that

can be used to further the field of study and create formulas useful for similar firms. Media

scholars have started to look at firm-level operations and have addressed some strategic

principles across similar firms. (Chan-Olmstead 2006, DeMars 2010, Dimmick 2003, Picard

2004, Slocum and Albarran 2006).

This section will address some unique characteristics of the media industry, as well as

strategic literature that can be applied to the broadcasting industry. Many elements are

crucial for strategic management, and managers should be able to identify and understand

them in order to develop appropriate strategy. The economic topics below have been

sufficiently covered by other media scholars and do not need to be rehearsed in this project.

Therefore, I will dedicate time to connecting economic elements to the strategic elements

discussed in the previous section.

4.1 Developing Strategy

Strategy is concerned with the long term planning and allocation of important

resources that create sustainable competitive advantages. Strategic management addresses



20

the process and alignment of a media organisation to its environment (Chan-Olmstead 2006,

p.161). The previous section highlighted the importance of structure, resources and

development of core competencies. This section addresses some characteristics of media

firms and products- and how they can be utilised to develop strategic positions. I will

examine the consumer’s role and changes in market structure- then address how resources

affect strategy. Finally, I will talk about strategic tactics that firms employee.

4.2 The New Media Market: Consumer Control

Media firms have diversified their products and expanded their potential reach

through technological expansion. This shift has given producers the ability to share and

promote their products across multiple platforms and markets (Majoribank 2003,p.59). Lotz

says, “a confluence of multiple industrial, technological, and cultural shifts conspired to alter

institutional norms in a manner that fundamentally redefined the medium and business of

television” (2007,p.20). However, these shifts have also reshaped the way media is

consumed. Users have access to unlimited amounts of information from just about any

location. Additionally, switching from one device to another, or one channel to another, has

relatively low if any switching costs. Consumers can multi-task their media usage and are

less connected to traditional forms of communication (Vahlberg 2010,pp.2,9-10). Walker

and Bellamy show this change in power. The first generation of television users were known

as viewers and simply received the message from the producers; the new generation are

known as users, as they are no longer just receivers of information- but participants in

influencing content (2010,p.41). These changes have ushered in a shift in power from the

producers and owners of media content to the end user or consumer of content.

As a result of these changes, firms have had to re-tool and re-focus how they brand,

market and distribute their products. Traditional advertising supported media are losing

market share and must develop alternative revenue streams to supplement losses in theirprimary funding models. Ferguson claims that media supported entirely by advertising will

not thrive because audiences are more empowered than ever; they are able to avoid

advertising and spend less time with one outlet (Ferguson 2010,p.61, Picard, 2004). On the

other hand, users who access content across multiple platforms are more active in their

consumption. Pitts and Zeng claim that this shift creates new opportunities for advertising

and niche-casting (2010,p.23). Additionally, strategies have been redeveloped to support

nonlinear, cross-platform expansion (Lotz 2007,p.20).



21

Strategic direction of a firm is highly dependent on the users and consumers they

target. Unfortunately, it is difficult to predict consumer behaviour. Managers must adopt a

level of flexibility so as to not get caught off guard by changes in consumer preference- yet

must be careful not to over commit to high risk investments. Chan-Olmsted says, “as

technology shifts more control and power to consumers, media strategies and competitive

dynamics should be evaluated based on consumer, rather than industry, factors or definitions”

(2006,p.174). Managing this volatile environment requires careful consideration of consumer

interests, and managers need to adopt models that measure and evaluate shifts in consumer

preferences. IBM published a report addressing shifts in consumer behaviour and the future

of advertising. The report claims that the future of the advertising market will be shaped by:

consumer attention, creativity, specific measurement tool and revamped advertising

inventories (Berman 2007,p.2-5). Marketing trends will need to shift with consumers as they

move into new platforms. According to Pitts and Zeng, producers and managers should be

trained to recognise and adapt to changing usage patterns- and consumer expectations

(2010,p.23). Further complicating the development of appropriate strategy is the valuation of

different platforms and products presented to consumers. Investment into state of the art

mobile technology may create an attractive selling point, but if demand from advertisers or

consumers fails to meet operational investment, then risks and costs outweigh the benefits of

an added service. Chan-Olmsted has proposed a media product taxonomy chart to determine

risks and involvement that products and services require from consumers (Figure 4.1). This

chart classifies consumer involvement and risks- dependent on their time and financial

investment into media products. Data collected from this type of assessment can be useful

for SWOT analysis in the strategic planning stages. Implementation of this type of consumer

usage chart simplifies consumer activity and gives firms the ability to design plans that

reduce risks.

4.3 Resources and Diversification

Resources that make up a media organisation are the tools that drive product

development and are the main sources of value for an organisation. In the previous chapter, I

talked about differences between physical and knowledge based resources- and the need for

cross directional management and coordination. This section addresses some unique

characteristics of media products and presents Lander and Chan-Olmsted’s Related Product

Diversification strategy.



22

Media firms have often been described as offering products that have multiple

functions (Albarran 2010,p.66, Doyle 2002, Picard 1989). Picard has termed this unique

characteristic as the “dual” product nature of the media (Picard 1989). Media products

function in two distinct markets; the content market where the product is presented to

consumers, and the advertising market where the product is sold to advertisers- looking to

sale their product to the consumer. The dual nature of media products plays a significant role

in the development of strategic elements in a media firm. While media firms are able to draw

revenue from products that operate in dual markets, technology and digitisation has driven

the industry towards multi-platform consumption patterns (Albarran 2010,p.72-74).

Consumers seek products that are easily accessible through different devices and on different

platforms. Coupled with the explosion in television channels, broadcasters are faced with

extreme competition from new and old media outlets. Moreover, market boundaries are

becoming increasingly insignificant as consumers are able to substitute and switch media

products. However, media products- which are public goods- can lead a firm to develop

diversification tactics in order to exploit economies of scope and scale. (Chatterjee and

Wernerfelt 1991). Technology provides traditional media outlets with the ability to re-

package and deliver products in new ways.

A study carried out by Landers and Chan-Olmsted set out to determine which

resources became more vital to a firm’s competitive advantage as markets changed over time.

The study found that property and knowledge based resources contribute to different

production capabilities and effect strategy in different ways. Knowledge based resources,

like human capabilities and multi-purposing, became important as markets became more

volatile, while property based resources affected the performance of an organisation (Landers

and Chan-Olmsted 2004,p.21). While the results are applicable to all media firms, the study

highlights the importance of resource management in media firms. Effectively coordinating

and managing tangible and intangible resources can lead to the development of core

competencies. Managers should build strategies that emphasise and exploit those core

competencies (Hitt, Ireland, and Hoskisson 2007,p.385).

Niche marketing has become a normative feature of media firms in the UK

(Datamonitor 2009). Specialised programming and products are designed to find particular

groups and exploit demographic gaps in the market. Niche-casting or narrowcasting is a way

to reach these groups and deliver unique products. The audience should; therefore, drive the

type of advertising that firms seek (Napoli 2003,p.25). In order to be successful, firms must



23

clearly define who their audience is, or who their audience will be, in order to develop

objectives that will help them meet their needs as an organisation (Pringle and Starr

2006,p.14). Niche marketing drives product development and advertising trends. Managers

need to clearly establish what groups they will target; much of this is dependent on

organisational structure and purpose.

Corporate strategy seeks to exploit resources across different firms by promoting

firm- level strategy tailored for that firm’s market segment. According to Dimmick, some

media conglomerates have implemented the niche-breadth strategy to exploit firm and market

specific resources to diversify their products- and build niche segments in multiple markets

(2003,pp.68,75). One example he gives of the niche-breadth strategy is a corporation that

owns multiple daily newspapers. The strategy of a local-suburban based daily will differ

from the strategy of a large metro-daily, yet corporate strategy should exploit these

differences by facilitating firm-level strategy through supplemental resource allocation

(Dimmick 2003,pp.73-75). Although the niche-breadth strategy is designed to exploit

capabilities within media conglomerates at the corporate level, the principles can be applied

to individual organisations. Dimmick suggests that strategy should build on the aggregate

potential of the different groups’ and firms’ unique capabilities. He delineates four

characteristics of the niche-breadth strategy: scale as defined by revenues, diversification,

economies of scope, and multi-national operation (2003,p.70). I have omitted scale and

multi-national operation from this discussion as they are not applicable to this study.

Diversification spreads risks and increases potential access to new platforms and

markets. Economies of scope can help firms diversify. Conglomerates can easily diversify;

however, smaller firms must work harder to diversify. Scope economies occur when

production of one product lowers the cost of another because costs are spread across those

products (Picard 1989,p.63). Additionally, Landers and Chan-Olmstead have suggested a

firm-level strategy of related product diversification that may be useful for firms to extend

products into other markets and across formats (2004,p.173). This type of diversification

exploits economies of scope. Media firms can extend the life of their products and introduce

them to new audiences. Similar to the niche-breadth strategy, related product diversification

seeks to exploit capabilities and available resources across different departments and

platforms. Moreover, related product diversification may be useful for local firms to develop

appropriate diversification techniques.



24

This chapter has addressed some unique economic characteristics of the broadcast

industry and assessed how those elements affect strategy. As aforementioned, we have seen

that a shift in market power, technological capabilities and resource allocation has reformed

the media industry. Firms must develop strategies that account for these changes. The next

chapter will address how firms can develop strategic processes, at the local level, to deal with

these changes.



25

Chapter Five: Strategy in Local Television in the UK With the information presented in previous chapters, it brings us to the final section

addressing needs of local broadcasting firms in the UK. This section presents strategic

methods that local broadcasters could implement in their operations. The Shott Report hasbeen used to assess needs of local broadcasters in the UK. Additionally, case study materials

have been included from interviews conducted with local station managers from the US, as

well as strategic profiles from local television companies in Spain and Taiwan. Data

collected has been used to create a model for strategic positioning and a model for creating

firm-level strategy.

5.1 Need for Local

Technology has led to an explosion in the media industry. There are more channels,

platforms and content available than ever. Consumers are given countless options, as a result

their usage patterns have drastically changed. Globalisation and conglomerates rule the

media space. Local and regional media market space is dominated by products from the

media production centres of the world (Sanchez-Tabernero 2006,pp.463,468). Television has

evolved as much as any traditional medium; it has been redeveloped to meet the needs of

fragmented audiences (Lotz 2007,pp.4-6). The competitive landscape, which was once

clearly defined, is blurred and confusing. Not only do old mediums compete with one

another, now they compete with new mediums. Audiences are spread across hundreds of

channels- and across multiple outlets. Some have argued that the current media landscape is

too crowded and competitive to support new local media systems (Smith and Hendricks

2010). Bailey believes that investment costs will be too high and returns to low to support a

local system in the UK (Marketing 2010,p.13). Robertson argues, on the other hand, that

globalisation and the internationalising process contribute to the development of local

markets (1994). Additionally, as Esser explains, popularity of local content and programmes

increased in the mid-1990s even as an international television industry emerged (2007,p.163).

This writer suggests that globalisation, deregulation and conglomerates create the need for

progressive local media systems. These local systems provide an important outlet for cultural

definition and expression lost on a global audience. Television can meet these local needs as

it plays an important role in our understanding of the world around us.



26

Ashuri says, “television offers the resources that human beings need both for

positioning themselves and for understanding and respecting others. It is therefore not

just a form of media but a format through which a society articulates and maintains its

differences in relation to ‘other’ cultures while at the same time searches for some

forms of commonality” (106).

Although this study is not focused on expounding on the need for local media, it is

important to establish the basis for this project. This chapter presents applicable strategic

positions for local television firms in the UK based on information gathered from the Shott

report and data collected from case studies.

5.2 The Shott Report

A recent report was published addressing the viability of commercially run local

television in the UK. Commonly known as the Shott Report, this review explains how local

television could be possible, as well as addressing some issues a local system will face. I

have used the report to highlight key components of local broadcasting in the UK. These

components will be used to develop strategic positions for local broadcasting firms. The

following section will discuss: brand identity, sustainability, content, revenue streams,

promotion and competition -as presented by the Shott report.

The report expresses the need for local stations to develop a strong brand and long-

term sustainable business model (p.2). With the help of the Steering Group, the report lays

out the conditions they deem necessary for local stations to accomplish their goals. Local

news and information is considered the best option for local content and production. Content

tailored to the specific locale will provide an additional source of news, which is difficult to

replicate by regional and national news services (p.3). Audience research has shown that

there is a desire to have more localised news offerings (BBC Trust 2011). Furthermore, thereport suggests that local stations should seek to produce a minimum of two hours of local

content per day (pp.9,37).

For a local station to be successful, it must be able to sell its audience to advertisers.

So, it is imperative that local stations work hard to build consistent viewership. In order to

build a consistent audience, the report suggests some promotional activities that local stations

can use to engage with potential viewers. Cross-promotion on other channels, prominent

positioning on the electronic programme guide and an automatic re-directing system --a



27

system that would send viewers directly to their local newscast with the option to switch back

to regional or national coverage --are ways to promote and build a repertoire with viewers

(pp.3-4,24). These methods will generate interest and drive viewers to the new service.

Napoli refers to audience measurement as the “coin of exchange” or currency of

media products (2003,pp.19-21). These measurements create value that can be turned into

revenues through advertising. However, there is no system in the UK designed to measure

local television audiences. One of the major limitations of local broadcasting has to do with

the lack of audience measurement devices (Shott Report 2010,p.4). The inability to deliver

consistent viewer statistics means that local firms must develop alternative currencies in order

to evaluate their products and sell advertising (Shott Report 2010,p.29). Additionally, the

report emphasises the importance of alternative revenue sources- claiming that local

advertising alone would be insufficient to meet the long term goals of a station (pp.4,37).

Local stations could generate additional income by providing news services for national and

regional news firms. News gathering would be primarily for the local station, but if local

news had regional or national significance, other broadcasters could pick up the stories.

Furthermore, the report discusses some operational tasks that will build a local

station’s position in the market. The proposed local broadcast system would be supported by

a national network that provides supporting services, access to national advertising and

network content (p.6). Jankowski and Fuchs discuss the importance of networks for local

broadcasters. They say, “the distinctive aspect of a network is its ability to integrate local and

national services into a continuous, balanced flow” (1995,p.62). The report stresses the need

for owners to develop relationships with other local media groups and build upon the

capabilities within their particular market rather than subsist on national content (p.6,33-34).

The size of the organisation is an important factor in strategic choices. Economic fluctuations

affect firms differently, depending on their size and external capital (Picard and Rimmer

1999,p.6). Therefore, managers must carefully consider their level of dependence on the

national network, and they should strive to build local connections with other media firms

and local businesses.

The report identifies some of the major hurdles and obstacles local stations will face.

For this project, I will discuss issues that can be addressed from a strategic stand point-

mainly concerned with competitive forces governing the market and affecting local firms.

Local broadcasters will be competing for viewers and advertisers. Competition for viewers

exists between the broadcaster and other television channels available to the consumer.



28

Additionally, viewers have the ability to supplement and substitute their television viewing

with other forms of media. Furthermore, competing for local advertisers is where local

stations will experience some of the slimmest margins and toughest competition. The report

delineates some of the challenges local broadcasters will have in attracting local advertising.

Established media groups-- newspapers, radio, outdoor advertising, direct mail and internet

search engines -- will control much of the local advertising space. Most local businesses do

not have big advertising budgets and will find it difficult to switch or increase their

advertising spend with local television (Shott Report 2010,p.24). Local broadcasters must

develop attractive products, promotional schemes and creative selling points that highlight

the distinctive nature of their products to attract viewers and local advertisers.

The Shott report presents information it deems necessary for the successful branding

and long-term sustainability of local broadcasting firms in the UK. Content and

programming should be tailored to the local market. This will separate local broadcasters

from regional and national news providers. Content should be promoted using cross-

promotional schemes to generate interest and establish a presence in the market.

Additionally, local firms should develop multiple revenue streams to reduce dependency on

local advertising revenue. Management should work to expand local networks and limit their

reliance on the national network. Lastly, stations must find ways to deal with the competition

within their locale. Station promotion should highlight the unique nature of their products.

The following section will contribute additional data to the discussion by examining

management principals and strategic positions of local stations in other parts of the world.

The information will contribute to the strategic principles for local broadcasting in the UK.

5.3 Case Studies

5.3.1 Local Television in the US

I have gathered additional information from station managers in two mid-sized US

markets. The US has a strong tradition of local, commercial broadcasting, while the UK has

thrived on a national, public-service oriented system. Although the UK system and the US

system vary greatly, there are some shared characteristics. Most local stations in the US

operate with a sense of duty and mission to their viewers. In 1999, Hurricane Floyd left a

trail of destruction through much of Eastern North Carolina. Flooding and power outages left

many people stranded for days and some were displaced for years. During the initial

aftermath and weeks following, local television stations stayed on the air continually. They



29

provided crucial information to people and provided an outlet for them to connect with the

proper authorities to assist them. Many of the stations lost revenue and spent a great deal of

money to provide around the clock coverage. This coverage and commitment to public-

service was seen six years later when Hurricane Katrina devastated most of the Louisiana

coast, and many have referred to the local news coverage of Katrina as admirable and

necessary for the people and nation (Rogers 2006 and Powers 2005). Similarly, the 7/7

bombings in London, were covered by the BBC, ITV and other news organisations with the

same fervour and response (Lorenzo-Dus and Bryan 2011 and Douglas 2006). On-going

news coverage, beyond the scope of regular coverage, highlighted the importance of public-

service responsibility and provided a crucial service to families and people affected by the

attacks. These similarities show that the two systems share a common commitment to public

interest.

Strategic positions of local firms in the US will provide additional insight into the

direction and focus that managers in the UK should consider. Four elements were persistent

throughout the interviews: brand value, human resources, research and development, and

multi-platform management. I will discuss these elements and the strategic components,

management styles, and organisational tasks these managers identified as important

components in a competitive and volatile media market.

The broadcast market has become extremely unpredictable and highly competitive.

Technology moves faster than firms are able to keep their equipment up to date and

employees trained on the latest innovations (Slocum and Albarran 2006,p.147). Additionally,

power has shifted from producers to the consumers. As a result, traditional media

organisations have been forced to extend their operations across platforms and cut expenses

for seemingly marginal gains (DeMars 2010,p.259). Transferable brand value is one way that

managers have created long term value for their organisations. The brand, as defined by one

station manager, is the value and image a consumer associates with a product, the first thing

that pops into their head (STM1). He went on to say that branding builds trust and can relay

a sense of community service. Additionally, the brand should be based on principles and

values, not on a platform. The brand must extend beyond television. Therefore, the brand

must be adaptable to the consumer’s choice. Brand value is an intangible or knowledge

based resource, and according to Landers and Chan-Olmsted, less affected than tangible

resources by market fluctuations (2004,pp.6-7). Intangible resources tend to be stable



30

investments in competitive markets; developing these resources, such as your brand value, is

a necessity in today’s media market (STM1).

Another intangible element, which is an important feature for local stations, is

human capital. Station managers talked about the importance of employee development,

training and management. When asked about the value of employees, one manager said they

were the most valuable tools he has (STM2). The people in an organisation shape its culture.

The culture of a firm is more important than the right equipment. Culture can foster growth

or stunt it; it affects the way people work together and how they think about the future

(STM2). Another manager said that his role is to, “make sure everyone who reports to me is

successful…If we are successful, we reach all of our goals” (STM3). He went to say that a

lack of success from one person can hamstring the entire organisation.

One of the biggest challenges managers face is investment into technology and

innovation. One station manager says that investment in innovation is necessary to maintain

competitive advantage, but notes that determining the level of investment is extremely

difficult (STM3). Innovation encompasses investment into technology and research and

development to optimise resources. One manager notes that operational excellence is the

cost of entry and massive investments are required to find out what works (STM 1).

Operational excellence is a strategic concept that simply means performing operational tasks

well (Haddock, Mizuno and Ngai 2006,p.3). As a result, stations have to spend money on

technology to find out what will work. Managers invest in developing services and products

that are higher quality than their competitors. Broadcasters must continually invest in

technological upgrades and invest in future growth. However, these investments should not

lower the investment or value of current products (STM 1). In other words, investment in

current products should not be lowered in order to spur growth of new products, especially if

the new products produce marginal gains. STM 2 says, “from a technology stand point,

we’re looking at ways to get out in front…I still have to do a better news cast, I need to do

that because that is just the cost of entry. If we don’t have a decent news cast than forget it,

but while we’re doing that, we’re looking at things that are going to be important to us in two

or three years…technology gives the opportunity for stations to grow if they can strategically

figure it out and then they can move forward”.

I have talked briefly about the shift in television from mass audience to niche and

specialised groups. Lotz says, “although television can still function as a mass medium, in

most cases it does so by aggregating a collection of niche audiences” (2007,p.28). The



31

station managers I spoke with echoed this shift. They identified their organisations as a multi-

platform media firms, and their job titles reflected this shift- as they were listed as multi-

platform managers rather than broadcast station managers. One manager addressed this

change and referred back to the value of the brand versus the platform (STM1). Part of this

shift is actually an inter-organisational proposition. Although digital services make up a

small percentage of revenue, you have to find a strategic balance that fosters growth in that

sector (STM3). You have to invest in and recruit people that understand the multi-media

aspects of the business without abandoning core revenue streams. The consumer will choose

the next technology or the next platform; we have to be flexible enough to meet the consumer

where they are instead of expecting them to come to us (STM1).

Information collected from the station managers showed a clear commitment to

development of intangible resources. Human capital and brand value are essential in a

volatile media environment. Managers can build core competencies and strategic positions

based on their commitment to their people and value of their brand. Additionally,

maintaining competitive advantage requires continual investment into technological

capabilities.

5.3.2 Taiwan Satellite Companies

Mai analysed the satellite channel system in Taiwan. Her findings revealed thatcompany size, operational type and ownership structure influenced strategies that firms

develop (2002,p.145). The study applied Porter’s three generic strategies— cost leadership,

differentiation and focus-- to the Taiwanese satellite system. Mai found that Porter’s

strategies were too broad and did not fit the Taiwanese system, yet the basic concepts were

still transferable to build a new set of strategies for Taiwanese satellite companies. Company

size was found to effect strategies of satellite companies the most. Smaller firms adapted

lower risk strategies and focused resources on specific segments of the market, while larger

firms differentiated their products and spread their resources (Mai 2002,p.161). Concentrated

or focus strategies, seen in smaller firms, are characterised by efficiency and competitive

advantage- developed through the narrowcasting techniques (Mai 2002,p.150).

These strategies are a direct result of the competitive nature of the satellite industry in

Taiwan. There are multiple satellite service providers ranging in size from small, single

channel broadcasters, to large conglomerates that control most of the media space. The

industry profile is similar to that of UK broadcast system in terms of company size and



32

number of operators in the industry. The results of Mai’s study highlights the importance of

firm-level strategy tailored to each station. The size of the firm greatly affected the scope and

capabilities of that firm. Smaller firms developed strategies that capitalised on their unique

market positions by focusing on the potential value of a single-product.

5.3.3 Local Television in Basque country, Spain

Another study analysed the role of local television in the promotion of the Basque

culture and language. Arana, Azpillaga and Narbaiza. discuss the current system of local

television in the Basque region of Spain. The system was first developed as a public service

to promote the culture. Local television was a way to reinforce the identity and language of

the Basque people. However, a lack of regulation has muddled the system and threatened its

existence (Arana, Azpillaga, and Narbaiza 2004,pp.89-90). The local system suffers from a

lack of organisational structure and proper planning. Arana, Azpillaga, and Narbaiza suggest

ways to revitalise the system and turn it into an important device for cultural expression in the

region (2004,p.91). They say, “the objective of local stations should not be to compete with

more general channels in regards to geographic coverage and content, but rather to serve as a

complement in their search for information and for subject matter of local, cultural, social,

and historical relevance” (Arana, Azpillaga, and Narbaiza 2004,p.89). New models should

be developed to spur future growth and match the objectives of the society and country(2004,p.92).

The case from Basque Country is a good example of how a lack of strategy and poor

management can threaten local media systems. Local media services provide a useful

cultural outlet, but they require appropriate management that understand the cultural

elements- and are able to develop strategies that exploit these unique characteristics. Arana,

Azpillaga and Narbaiza offer constructive strategies for local stations to operate as

commercial broadcasters, but maintain their role as agents of public-service (2004,pp.108).

Local culture should shape the way local content is produced and transmitted. Strategies

should exploit these unique local elements when developing core competencies and

competitive advantage.

The Taiwanese case study shows some strategies that have been developed based on

the size of the firm in a highly competitive commercial market. Local television structure in

the Basque region stressed the importance of building a culturally relevant product with less

focus on commercial interests. The local system in the UK will have elements from both of



33

these systems. Commercial viability with supplementary support from public interest and

government regulation means that the local stations will need to adapt strategies that address

the needs of commercialisation and culture. The Taiwanese study shows how a small

commercial operation can compete with other media firms, while the Basque study highlights

the cultural significance of local television.

5.4 Strategies for Local Broadcasters

The Shott report laid out some of the normative elements that may lead to a

sustainable local television system in the UK. The case studies explored some common

themes of local broadcasters in the US, as well as commercial elements from the satellite

system in Taiwan and public service system in the Basque country, Spain. This section

introduces strategic methods that can turn these elements into strategic positions and actions.

Stations should understand their position in the local market. Picard and Rimmer

found that national trends do not necessarily reflect local trends, and local media managers

need to measure local economic trends apart from national (1999,pp.4-5). Strategic

positioning identifies internal and external forces and assesses the impact they will have on

strategy (Johnson, Scholes, and Whittington 2009,p.14). As mentioned in chapter three,

Porter’s Five Forces model as well as a SWOT analysis are ways to assess where a firm

stands in comparison to their competitors in the market. While these models are useful and

should be considered- capturing all of the intricacies of the local market is difficult. A more

in-depth model designed specifically for the local broadcasting system in the UK would paint

a clearer picture of where a broadcast station is positioned. Resources, competition,

organisational structure and the national network are four factors that contribute to the

strategic positioning of a local broadcast station. These factors make up the forces that

contribute to the development of core competencies, competitive advantage and achievable

long term goals. Positioning models eliminate unnecessary factors and keep firms focused ontheir capabilities. I model the effects of internal and external factors on the development of a

strategic position for local stations in the UK (Figure 5.1). This strategic positioning model

charts important forces from the different internal and external factors that will directly affect

the strategic capabilities available to a firm. The model has been developed based on

information gathered from the Shott report, the case studies and the strategic models

presented in previous chapters.



34

I have identified four categories for firms to analyse and identify their strategic

position. The first two categories- resources and organisational structure- are concerned with

the internal forces of that organisation. Management style, organisational culture and

business models make up an organisation’s structure. Resources are the intangible and

tangible sources of production and value creation. Non-scientific evidence from the case

studies suggests brand value, content and human capital are primary intangible resources of

competitive advantage for local broadcast organisations. Organisational structure and other

resources should be developed to support the growth of these primary competitive

advantages.

External factors can be categorised into two groups: competition and the national

network. The level of local competition must be assessed in order to determine how

accessible the local advertising market will be. The national network will also play an

important role in the strategic position of a firm. A firm’s dependence on the national

network, or lack thereof, will strongly influence programming decisions, resource allocation

and local market penetration.

Once a strategic position has been established, a firm can develop a strategy and

implement an actionable timeline. Developing a strategy requires three steps: development

of core competencies, establishing a competitive advantage and setting achievable long term

goals. Once these steps have been taken, firms can create an implementation and assessment

timeline. This timeline sets short term objectives and periodic assessments, while

maintaining focus on the long term goals of the firm. Figure 5.2 models these steps. Short

term objectives should address immediate or situational issues; these outcomes can vary in

outcome and material (Slocum and Albarran 2006,p.152). Long term issues such as shifts in

technology and changing demographics can be addressed as part of the long term strategic

aim. Landers and Chan-Olmsted say, “managers also may revise strategy decisions in

accordance with the uncertainties they face and in response to the information gained

from environmental scanning and resource evaluations” (2004,p.8). Recognising and

planning around external market fluctuations will keep a local firm flexible and able to adjust

their actions without abandoning their long term objectives. The composition of a firm’s

strategic position, along with their competencies, competitive advantage and long term goals

form the bases of a local broadcaster’s strategy.



35

Conclusion

My aim has been to provide information that contributes to the academic field of

business strategy and local media systems, as well as provide information that professionals

can utilise in the day-to-day operations of their organisations. This project has suggested

potential strategic decisions for future managers of local television stations to consider. The

models have been developed based on information gathered from previous studies on

business strategy, the Shott Report and case studies from other local broadcast systems.

Shifts in market and consumer power demonstrate the need for appropriate strategies that

exploit a firm’s advantages and minimise their weaknesses- in a world where marginal gains

and losses can result in success or failure. Resources and organisational structure should be

evaluated to establish the internal networks that contribute to organisational culture.

Additionally, managers should consider the implications of local and national competition, as

well as their dependence on a national network. External factors will greatly affect the

strategic capabilities and position of a firm. Strategies for local television should be

concerned with developing core competencies, competitive advantage and long-term goals-

based on intangible assets that are less prone to market instability.

A limitation of this project has been the non-existence of the local system for which

the models have been designed. The information is based on an ideal system that has yet to

be established. There may be a significant number of changes made to the structure of the

proposed system between the publication of this project and the creation of a local system.

Future research into this type of business strategy could address the topic from a cultural

stand point and evaluate the role that local culture plays in local television systems.

Additionally, local systems in the nations of the UK may require a modified strategic

approach. Research could compare audience expectations in the nations to that of the UK as

a whole.



36

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Appendix 1

Figure 2.1

Chan-Olmsted’s Strategy Map of factors that affect formulation and

implementation. (2006, p. 176)



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Appendix 2

Figure 3.1

Porter’s Five Forces Framework (2008, p. 80)



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Figure 3.2

Lewis and Lawton’s Organisational Functions Model (1996, p.222)



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Figure 3.3

Schein Model for understanding culture, strategy and environmental

context (found in Küng-Shankleman 2000, p. 20)



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Appendix 3

Figure 4.1

Chan-Olmsted’s Media Product Taxonomy (2006, p.175)



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Appendix 4

Figure 5.1 Determining Strategic Position

Strategic Position

Resources

Intangible: HR, Content, Programming,

Brand Value, market knowledge

Tangible: Facilities, Equipment

Competition

Local market forces, other local media

firms.

(Porter’s Five Forces)

Organisational Structure

Management styles

Culture: mission, purpose, community

involvement

Business Model

National Network

Level of dependency: funding, content,

structure

Regulatory structure



Figure 5.2 Firm-Level Strategy

Strategic Position

Develop

Core

Com etencies

Establish

Competitive

Advantage

Set Achievable

Long Term Goals

Actionable timeline for implementing and assessing strategic decisions

Firm-Level Strategy

Business Strategy of Local Television in the UK

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