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A Strategic Audit of Time Warner Inc. with Strategy

Recommendations For the time period 2014 to 2015

I. Current Situation

A. Current Performance

For Time Warner Inc. 2014 was a year of change. They got rid of a publishing

business, made the transition to a company solely focused on creating and distributing the

best video content, successfully managed an unsolicited takeover, and announced their

intentions to introduce a stand-alone, broadband-delivered version of HBO. (Bewkes,

2014) Despite all the changes that Time Warner went through 2014 was still a year of

excellent financial achievements. Time Warner Inc. recorded revenues of $27, 359

million during the financial year ended December 2014, an increase of 3.4% over 2013.

Time Warner generates revenues through three reportable business segments: Turner

(36.7% of the total revenues in 2014), Home Box Office (HBO) (19.1%), and Warner

Bros. (44.2%). Return on Assets was 6.04% in 2014, an increase compared to the ROA

of 5.43% in 2013. Also Adjusted Earnings Per Share increased by 18% - the sixth

consecutive year of at least high teens growth. (MarketLine, 2015) Net Profit in 2014 was

$3,827 million an increase of 3.7% from 2013. Financially 2014 was a good year for

Time Warner, and with continued performance there is room for great growth in the years

to come.

B. Strategic Posture

Although Time Warner does not have mission statement, the company website

offers a summary that defines what the company is about. “Time Warner Inc., a global

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leader in media and entertainment with businesses in television networks and film and

TV entertainment, uses its industry-leading operating scale and brands to create, package

and deliver high-quality content worldwide on a multi-platform basis.” (TimeWarner,

2016) Time Warner has a workforce of approximately 24,800 employees worldwide and

three operating divisions, Home Box Office, Turner, and Warner Bros. Entertainment.

Time warner constructively collaborates these three segments to create a cohesive

company culture that follows their basic beliefs in journalistic integrity, freedom of

expression, diversity of viewpoints and responsible content are at the heart of what they

do. By aligning their businesses with these beliefs, they are able to drive the growth of

their businesses in a responsible and ethical manner, strengthen their reputation, and help

create a better-connected and well-informed world. (TimeWarner, 2016)

Time Warner Inc. Operating Divisions:

- Time Warner’s Tuner segment consists of businesses managed by Turner Broadcasting

System, Inc. Turner operates domestic and international television networks and related

properties that offer entertainment, sports, kids, and news programming on television and

digital platforms for consumers around the world. (TimeWarner, 2016)

- Time Warner’s Home box Office segment consists of businesses managed by Home

Box Office, Inc. Home box Office operates the HBO and Cinemax multi-channel

premium pay television services; with the HBO service ranking as the most widely

distributed multi-channel premium pay television service. (TimeWarner, 2016)

- Time Warner’s Warner Bros. segment consists of businesses managed by Warner Bros.

Entertainment Inc. that principally produce and distribute television shows, feature films

and videogames. (TimeWarner, 2016)

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Time Warner Inc. Objectives

- Improve environmental sustainability (Time Warner, 2016)

- Increase workforce diversity – cultivating diversity in content, products and

people. (Time Warner, 2016)

- Become the world’s leading video content company. (Time Warner, 2016)

- Be the preferred home for the best talent and ideas. (Time Warner, 2016)

- Create engaging and valuable content to share with consumers across

technological frontiers and geographic boundaries. (Time Warner, 2016)

- Be financially disciplined in everything they do in order to deliver returns to

stockholders. (Time Warner, 2016)

Time Warner Inc. Strategies are as follows:

Use their industry leading scale and brands to increase investments in the best

storytelling. (Time Warner, 2016)

Harness technology and develop new business models to increase the value of

content to consumers and distributors and drive growth for their businesses.

(Time Warner, 2016)

Increase our presence in the most attractive international territories to take

advantage of the growing demand for our content worldwide. (Time Warner,

2016)

Optimize our operating and capital efficiency to provide attractive returns to

our shareholders. (Time Warner, 2016)

Time Warner Inc. Policies

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- “Time Warner is committed to strong corporate governance practices that

allocate rights and responsibilities among the company's stockholders,

directors, and managers in ways that maximize long-term value for our

stockholders. We frequently go beyond regulatory requirements to promote

effective oversight and management of our company.” (Time Warner, 2016)

- “Time Warner is a global company with a worldwide supply chain. We strive

to be a responsible corporate citizen in the communities in which we, or our

suppliers, do business.” (Time Warner, 2016)

- “At Time Warner, we are committed to fostering a business environment

where fair, honest and respectful dealings with each other, our customers,

competitors, suppliers, government agencies and communities are everyone's

responsibility. Our unwavering commitment to high ethical standards of

business conduct is a core value that is strongly supported at every level of

management.” (Time Warner, 2016)

- “We are honored by the recognition of our peers and respected external

organizations for our efforts to be a responsible corporate citizen.” (Time

Warner, 2016)

II. Corporate Governance

A. Board of Directors

The Board of Directors has 12 members, and three standing committees: the

Audit and Finance Committee, the Compensation and Human Development

Committee, and the Nominating and Governance Committee. Each committee is

composed entirely of independent Directors.

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Jeff Bewkes (inside)

Chairman of the Board and CEO, Time Warner Inc.

James L. Barksdale (outside)

Chairman and President, Barksdale Management Corporation

William P. Barr (outside)

Former Attorney General of the United States

Stephen F. Bollenbach (Lead Independent Director)

Former Co-Chairman and CEO, Hilton Hotels Corporation

Robert C. Clark (outside)

Distinguished Service Professor, Harvard University

Mathias Döpfner (outside)

Chairman and CEO, Axel Springer SE

Jessica P. Einhorn (outside)

Former Dean, Paul H. Nitze School of Advanced International Studies (SAIS), The Johns

Hopkins University

Carlos M. Gutierrez (outside)

Chair, Albright Stonebridge Group

Fred Hassan (outside)

Partner and Managing Director, Warburg Pincus LLC

Kenneth J. Novack (outside)

Former Partner, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC

Paul D. Wachter (outside)

Founder and CEO, Main Street Advisors, Inc.

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Deborah C. Wright (outside)

Non-Executive Chairman of Carver Bancorp, Inc.

Three Committees

Audit and Finance

Deborah C. Wright – Chair

Robert C. Clark

Jessica P. Einhorn

Carlos M. Gutierrez

Fred Hassan

Compensation and Human Development

William P. Barr – Chair

Stephen F. Bollenbach

Mathias Döpfner

Fred Hassan

Paul D. Wachter

Nominating and Governance

Robert C. Clark – Chair

James L. Barksdale

William P. Barr

Stephen F. Bollenbach

Jessica P. Einhorn

Kenneth J. Novack

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Board and Committee Structure

The Board of directors has 12 members, with only one being an inside director

and the rest being outside directors. According to the By-laws the general size of the

Board should be no fewer than 10 and no more than 14 directors and a majority of the

directors must be independent. The current Board meets both these requirements. Also

directors are encouraged to own the Corporation’s stock. It is expected that, within five

years of joining the Board, a director should own at least 10,000 shares of the

Corporation’s stock. Directors are encouraged and expected to attend the Corporation’s

annual stockholders meeting. (Time Warner, 2016)

The Board’s primary responsibility is to maximize long-term stockholder value

for the Corporation’s stockholders. The Board selects the senior management of the

Corporation, monitors senior management and the Company’s performance, and provides

advice and counsel to senior management. Another responsibility of the Time Warner

Board of Directors is to determine the appropriate leadership structure for the Board.

Jeffrey L. Bewkes was elected the Chairman of the Board of Directors. Mr. Bewkes has

the responsibility for overseeing Board-related matters, in consultation with the Lead

Independent Director; and presiding at the annual meeting of stockholders. In June 2014,

Stephen F. Bollenbach was appointed as Lead Independent Director. In January 2015, the

Board determined that the current structure, with one individual serving as Lead

Independent Director, and another serving as the company's Chairman and CEO, is

effective and appropriate. (Time Warner, 2016)

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The Boards reviews the Company’s long-term strategy annually, reviews the

performance of the Chairman and CEO, is responsible for selecting the CEO, should have

general oversight of the management of the Company’s risks.

B. Top Management

Jeff Bewkes

Chairman of the Board and CEO, Time Warner Inc.

Howard M. Averill

Executive Vice President and Chief Financial Officer

Paul T. Cappuccio

Executive Vice President and General Counsel

Gary L. Ginsberg

Executive Vice President, Corporate Marketing and Communications

Karen Magee

Executive Vice President and Chief Human Resources Officer

Carol A. Melton

Executive Vice President, Global Public Policy

Olaf J. Olafsson

Executive Vice President, International and Corporate Strategy

Richard Plepler

Chairman and CEO, HBO

John Martin

Chairman and CEO, Turner

Kevin Tsujihara

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Chairman and CEO, Warner Bros. Entertainment

The officers of the corporation are elected by the Board. Each officer is

responsible for getting approval from the Board and implementing their own strategic

plans to achieve the objectives of Time Warner Inc. Article V: Officers within the By-

Laws of the company outlines in detail the sole responsibilities that each officer’s

position entails.

III. External Environment: Opportunities and Threats (SWOT)

A. Societal Environment

1. Economic

One of the environmental issues that is currently affecting the Time Warner Inc.

market is economic forces. The Company’s financial condition and operations may be

affected by weak domestic and global economic condition. The global economy

continues to be volatile, with regions and countries, such as Argentina, Brazil, the

Eurozone, India, Russia and Venezuela, facing uncertain or slow economic growth.

(Annual Report, 2014) These conditions could lead to lower consumer spending for the

company’s content and products in these regions and countries. (Annual Report, 2014)

The U.S economy for 2015 seems to be on an upswing with unemployment rates

at 5.5%, a steep decline from being in the double digits. (Kiplinger, 2016) More

consumers with jobs, means more money being spent on products which is good for Time

Warner.

2. Technological

New technology is directly affecting the way Time Warner Inc. must offer its services

to consumers. Technological changes have driven and reinforced changes in consumer

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behavior as consumers seek more control over when, where and how they consumer

content. Streaming services such as Netflix and Hulu have drawn consumers away from

subscribing to multichannel video services, which could cause subscription revenues to

decline. The disruption of the advertising-supported television model due to increased

online video consumption and digital video recorders. Also the wide-scale use of

discount rental kiosks such as Redbox, which generate less profit per transaction than the

sale of physical disk. (Annual Report, 2014) Websites such as Piratebay, which allows

the Company’s content to be illegally downloaded and pirated.

3. Political-Legal

Time Warner Inc. is subject to a variety of U.S and international laws and regulations.

Time Warner Inc. could incur significant costs to comply with new laws or regulations or

changes in interpretations of laws or regulations or substantial penalties or other liabilities

if it fails to comply with them. Following the new laws could cause the Time Warner to

change business practices in a way that is adverse to business. Also if there are changes

in laws that protect the company this could lead to greater risk of liability for the

company. The company may also be subject to claims that it infringed intellectual

property rights of others, which could require the Company to change its business

practices. Time Warner is also subject to risks of accidental or intentional release or loss

of data maintained in the information systems and networks, including confidential

personnel, customer or vendor data. (Time Warner, 2015)

4. Sociocultural factors

Consumers are shifting towards streaming content instead of subscribing to a

multichannel video service. (Annual Report, 2014) More and more time is being spent

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online by consumers so a shift towards service being provided online is the new trend.

Consumers want content that they can view on their phones and tablets instead of just

their televisions. Also there is an emphasis on companies going green and being

environmental friendly. Time Warner is on top of this trend by listing one of their major

strategies is environmental sustainability. Health and wellness is also a current trend with

childhood obesity rates being higher than ever before. Time Warner may be affected by

an emphasis from individuals to not view as much television.

5. Demographic

An increase in immigrants will affect the content that Time Warner Inc. should offer.

(Annual Report) Time Warner Inc. may want to produce content directed towards the

growing Hispanic and African American segments of consumers in America. Also the

baby boomers are aging so products offered towards this segment may be beneficial. In

addition more kids are able to access online databases than previously so services tailored

towards them is a possible course of action.

B. Task Environment

1. Time Warner Inc. must analyze its task environment correctly in order to increase

the chances of reaching its goals. A driving force within the media and entertainment

industry is competition among firms. Time Warner’s major competitors include Comcast

Corporation, AMC Networks Inc., Twenty-First Century Fox Inc., and The Walt Disney

Company. (MarketLine, 2015) The Barriers to entry in the media and entertainment

industry are relatively high. Some independent films have had success in recent years,

but overall they are no match for the major media conglomerates like Time Warner. Time

Warner focuses on maximizing the profit potential of its original content by distributing

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that material through multiple channels. (Hoover, 2015) For example, a film produced by

Warner Bros, can be shown in theaters, aired for subscribers on HBO, and then aired

again on one of its advertising-supported cable outlets. (Hoover, 2015) The media and

entertainment market is popular among consumers but recent changes in behavior may

increase their buying power. Fewer and fewer consumers each year are watching

advertising-supported cable networks. This consumer behavior may cause a shift of

business for Time Warner to ditch their cable programs and focus on making digital

content that is available for streaming on all platforms or devices. Also, the consolidation

and vertical integration in the U.S and international entertainment and media industry has

resulted in increased competition for the company. (MarketLine, 2015) For instance,

consolidation among cable system operators, satellite service distributors, telephone

companies and other distributors has resulted in them having greater negotiating power.

Increased vertical integration of such affiliates could adversely affect the networks

segment’s ability to maintain or obtain distribution. (MarketLine, 2015) Supplier power

is relatively high in the media and entertainment industry. The suppliers which include

directors, writers, and actors all have power when negotiating with Time Warner film

studios. If Time Warner wants the rights to a particular writer’s work they may have to

meet several demands. The threat of substitute products is high, especially when dealing

with online streaming services. For example Time Warner’s HBO services are in direct

competition with Netflix. Time Warner will have to take a strategy that will differentiate

its online streaming services from Netflix. It ought to strengthen its platforms and

enhance its streaming and video-on-demand capabilities (Value Line, 2015)

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2. International governments are affecting Time Warner’s ability to compete. Time

Warner’s businesses are subject to regulation in the U.S and internationally, which could

cause the company to incur additional costs or liabilities or disrupt its business practices.

For example Time Warner principally uses foreign exchange contracts to hedge the risk

related to unremitted or forecasted royalties and license fees owed to Time Warner

domestic companies for the sale or anticipated sale of U.S copyrighted products abroad

because such amounts may be adversely affected by changes in foreign currency

exchange rates. (Annual Report, 2015)

C. Summary of External Factors

External Factors Weight Rating WeightedScore

Comments

Opportunities

Growing international presence

Positive outlook for global movie and entertainment industry

Growing digital advertising spend

Positive outlook for OTT market

.10

.10

.15

.12

4.2

4.3

4.2

4.1

.42

.43

.63

.492

Distributes films in more than 170 international territories.

Demand for filmed entertainment has been growing and is projected to continue growing

Time Warner holds significant portfolio of digital assets

Focused on enhancing presence in the over-the-top market.

Threats

Weak domestic and global economic condition

Decrease Trend in TV viewing

Intense competition within the industry

.15

.12

.10

.08

4.2

3.8

4.0

3.6

.63

.456

.4

.288

Could lead to lower consumer spending

TV viewership has been on decline last few years.

Includes direct competitors and other media, including internet and pirated content

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Pirating of content

Threat of substitute products.

.

.08 3.7 .296

Piracy of company’s content poses significant challenges.

Netflix and Hulu offer streaming services just like HBO GO

1.00 4.042

IV. Internal Environment: Strengths and Weaknesses (SWOT)

A. Corporate Structure

Chairman of the Board and CEO, Jeff Bewkes heads Time Warner Inc. Jeff

Bewkes is responsible for overseeing Board-related matters, which consists of 12

members, and for setting strategy and allocating capital to the company’s priorities.

(Time Warner, 2015) There are 7 senior corporate executives and 3 senior operating

executives. Each senior operating executive heads one of the three operating divisions of

Time Warner Inc. John Martin, Jr. is the Chairman and CEO of Turner Broadcasting Inc.,

Kevin Tsujihara is the Chairman and CEO of Warner Bros. Entertainment Inc., and

Richard Plepler is the Chairman and CEO of Home Box Office, Inc.

The three operating divisions of Time Warner Inc. can be viewed as separate

business units, with their operations and strategies being overlooked by headquarters in

New York City. The executives of each of the three operating divisions are responsible

for getting approval from the Board and implementing their own strategic plans to

achieve the objectives of Time Warner Inc. (TimeWarner, 2015) The job of headquarters

is to make sure that the operations of three business units align with the corporate

objective of becoming the global leader in media and entertainment.

B. Corporate Culture

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1. Time Warner utilizes its three business segments to create a cohesive company

culture that follows their basic beliefs in journalistic integrity, freedom of expression,

diversity of viewpoints and responsible content. (Time Warner, 2015) Time Warner has a

diverse workforce of approximately 24,800 employees. Being that Time Warner Inc. is

producer of creative media, employees are encouraged to share their ideas. Also

diversity is encouraged so there is no discrimination among the workforce based on

ethnicity, sexuality, or religious background.

2. The company values all go along with its objective of telling the world’s stories

through television, film and online. Time Warner aims to create economic and social

value through its content. The company values journalistic integrity among reporters,

producers and writers who expected to be honest and confirm facts before online articles

or TV segments are released to the public. (Time Warner, 2015) Freedom of expressing

their content is also valued. Time Warner takes pride in the ability of their reporters,

producers, TV crews, and film-makers ability to seek out and report facts and tell stories

without interference from governments or other external influences. (Time Warner, 2015)

Another thing Time Warner Inc. values its diversity of viewpoints. The diversity of their

content is important to their success in delivering content that appeals to global

consumers. Time Warner also understands that its content can have an impact on culture

and values reasonable content.

C. Corporate Resources

1. Marketing

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a.) Product - Time Warner Inc. coordinates the efforts of its three operating

divisions, Turner Broadcasting System Inc., Home Box Office, and Warner Bros., to add

value added attributes to its highly differentiated products. Two guidelines from Time

Warner’s strategy is, Investing in, and being home to, the best content, and Leading in

digital innovation. (Annual Report, 2014) The Turner operating division is home to

leading cable television networks and brands such as CNN, TNT, TBS, Cartoon Network,

Adult Swim, Boomerang, truTV, and Turner Sports. (Annual Report, 2014) Turner also

manages sports websites such as NBA.com, NCAA.com, PGA.com, and

BleacherReport.com. Turner is doing a good job of differentiating its products as

superior to other products, in 2014 TBS, TNT, and Adult Swim all claimed three of the

top 10 spots on domestic ad-supported cable in primetime among adults 18-49. (Annual

Report, 2014) The Home Box Office operating segment is the market leader among all

subscription video businesses by subscribers, revenue, or profits. HBO differentiates its

products from competitors by being home to some of the best video content. HBO is also

expanding its leadership in offering subscribers more ways to enjoy its great

programming through HBO GO and MAX GO, which give multichannel subscribers

access to its library on demand from a wide variety of devices. (Annual Report, 2014)

The Warner Bros. operating division offers products in the forms of feature films,

television, home entertainment, videogames, and consumer products. Warner Bros.

feature films crossed the $4 billion mark in worldwide box office for the sixth time, led

by blockbusters including The LEGO Movie, The Hobbit, and American Sniper which

was the highest grossing domestic film released in 2014. (Annual Report,2014) Warner

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Bros. continues to be in an industry-leading position for content in feature films as well

as TV programs.

Price – The pricing strategy of Time Warner products varies by each product. For

instance a consumer would pay the same price to see a film produced by Warner Bros. as

they would for any other media company. Also for their Turner segment their is no up-

charge to watch Time Warner television series versus other networks. But there is a price

differentiation strategy when comparing the Home Box Office division to other

companies. For example their new product HBO GO a monthly subscription is $15.00,

which is higher than the $8.99 a consumer would pay for Netflix. I believe this strategy

is meant for consumers to perceive HBO GO as a superior product due to its premium

price. HBO also offers an option for consumers to pay a monthly fee to view HBOs

exclusive channels on their T.V’s. These channels allow a consumer to view HBOs

series, sports, and movies. Through a deal with DirecTV it costs roughly $25 a month for

12 months to get the HBO channels. This is about the same price a consumer would have

to pay for other premium TV channels such as Starz or Showtime.

c.) Place – Time Warner focuses on maximizing the profit potential of its original

content by distributing the material through multiple channels. (Hoover) For example, a

film produced by Warner Bros., can be shown in theaters, aired for subscribers on HBO,

and then aired again on one of its advertising –supported cable outlets. (Hoover) Time

Warner places its feature films in movie theaters to reach consumers. Once out of

theaters Time Warner will then place these same movies in stores as DVDs and on their

HBO channels to reach more consumers. Also Time Warner will come up with video

games and fan merchandise to go along with their movies and T.V shows. Time Warner

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also has a strong online presence, offering streaming of data and other digital sites that

correlate and help promote their products. For example the Tuner segment which is home

of Tuner Sports, also operates digital sports properties, including BleacherReport.com,

NBA.com, NCAA.com, and PGA.com. (Annual Report)

d.) Promotion – Each of the three operating divisions of Time Warner Inc. are

used to promote each other. For instance you may see an advertisement for the new HBO

Go product on one of the Turner segments digital properties. Also when buying a

Warner Bros. movie on DVD you may find the catalog inside is full of advertisement for

other Time Warner products. The Turner segment has just extended its content

partnership with the NBA through the 2024-2025 seasons and a new agreement to air

Major League Baseball regular season and post-season games through the 2020-2021

seasons. (Annual Report) These agreements will help promote Time Warner in the sports

market. The Warner Bros segment uses video games and fan merchandise to promote

their feature films. For instance a consumer may find out about Warner Bros. new

Batman vs. Superman movie just by seeing all the fan merchandise being sold in retailers.

2. Finance

Time Warner is a financially stable company. In the 2011 fiscal year the highest

price paid for a single share of Time Warner stock was $38.20. The price for a share of

stock has continued to increase ever since and even the lowest price paid per share in the

2014 fiscal of $61.52, is almost double that of the highest price paid in 2011. Although

Time Warner revenue dropped to $27 billion in fiscal 2014, a decrease of more than $2

billion compare to fiscal 2013, this dip was largely because of the divestiture of the

company’s publishing business. (Hoover) A positive for Time Warner Inc. is a net

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income in 2014 of $3.83 billion, an increase of about $136 million compared to 2013

fiscal. Cash on hand for the 2014 fiscal was $2,618,000,000. ValueLine rates Time

Warner’s financial strength an A, the highest it can get. Return on Assets was 6.04% in

2014, an increase compared to the ROA of 5.43% in 2013. Also Adjusted Earnings per

Share increased by 18% - the sixth consecutive year of at least high teens growth.

(MarketLine, 2015)

3. Research and Development (R&D)

Following are some of Time Warner’s R&D objectives:

- Leading in digital innovation

- Create engaging and valuable content to share with consumers across

technological frontiers and geographic boundaries.

- Harness technology and develop new business models to increase the value of

content to consumers and distributors and drive growth for their businesses.

Time Warner Inc. has a reputable track record and forward-thinking strategy that

pushes the boundaries of innovation by investing in companies that develop business

partnerships with its divisions and within the media and entertainment industry.

(Timewarner.com) Time Warner is investing more R&D into developing new ways of

delivering content through streaming and digital sources. Time Warner realizes that in

recent years there has been a decline in cable television viewers and consumers buying

magazines. More people use a streaming service to view T.V shows like Hulu or Netflix

and less people watch cable. Also more people use digital sources like websites to read

the news or an article they are interested in.

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To compete in this new market Time Warner has been taking some necessary

steps. Turner operating division has begun to acquire a significant portfolio of digital

assets, including TBS.com, cartoonnetwork.com, NBA.com, and NCAA.com. Turner’s

digital properties collectively averaged approximately 124 million average monthly

domestic multi-platform unique visitors at the end of the 2014 fiscal year. (MarketLine)

These digital assets can also be used to take advantage of the growing digital advertising

spending. HBO GO is a new technology to combat against the decrease in television

viewers. HBO GO is HBOs is a streaming service that consumers can obtain by paying a

premium prices. HBO GO is meant to compete with other streaming services such as

Netflix and Hulu.

4. Operations and Logistics

a.) Listed below are some of Time Warner’s operations and logistics objectives:

- Improve environmental stability

- Be financially disciplined in everything they do in order to deliver returns to

stockholders.

- Become the world’s leading video content company.

- Optimize our operating and capital efficiency to provide attractive returns to

our shareholders.

- Increase our presence in the most attractive international territories to take

advantage of the growing demand for our content worldwide.

i.) Although Time Warner Inc. produces their own media across its three

operating division, the company also invests in outside companies to meet strategic

objectives. Objectives for potential investments include the delivery of new services,

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existing product enhancement, entry or expansion into a key strategic market, completion

of a strategic partnership, and critical research and development. (Timewarner.com)

ii.)Time Warner Inc. is an industry leader within the media market. New projects

are always being introduced and deadlines are constantly being met. Time Warner has

writers and producers working side by side to deliver the best content possible.

5. Human Resources Management (HRM)

Listed below are some of Time Warner’s HRM objectives and strategies:

- Increase workforce diversity – cultivating diversity in content, products and

people.

- Be the preferred home for the best talent and ideas.

- Optimize our operating and capital efficiency to provide attractive returns to

our shareholders.

- Committed to strong corporate governance practices that allocate rights and

responsibilities among the company’s stockholders, directors, and managers in

ways that maximize long-term value for stockholders

- Committed to fostering business environment where fair, honest, and

respectful dealings with each other, our customers, competitors, suppliers,

government agencies and communities are everyone’s responsibility. Our

unwavering commitment to high ethical standards of business conduct is a

core value that is strongly supported at every level of management.

Time Warner Inc. takes great pride in the diversity of its workforce composed of

approximately 24,800 employees. Employees are free from discrimination and are

encouraged to share new ideas. Time Warner strives to provide a workplace that can

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adapt to peoples' lifestyles and life stages. Time Warner allows employees to partner

with their managers to develop flexible work arrangement schedules. The purpose of

these schedules is to enable employees increased flexibility in how, when, and where

they get their work done and to increase employee satisfaction and decrease unwanted

turnover. (Timewarner.com) Time Warner also has health, welfare and financial benefits

that are designed to meet the needs and preferences of employees. Time Warner also

takes time to educate employees and make sure they receive the proper training to do

their job effectively. Also all divisions have programs, through a third-party childcare

provider, that provide backup care if an employee's regular childcare is unavailable.

(Timewarner.com)

6. Information Systems

The following are some of Time Warner’s information technology objectives:

- Create engaging and valuable content to share with consumers across

technological frontiers and geographical boundaries. (TimeWarner, 2015)

- Harness technology and develop new business models to increase the value of

content to consumers and distributors and drive growth for their businesses.

(TimeWarner, 2015)

- Optimize our operating and capital efficiency to provide attractive returns to

our shareholders. (TimeWarner, 2015)

Time Warner Inc. focuses most of its IT on making sure its employees have the

most up-to-date technology in order to create and deliver the best content. Time Warner

takes pride in delivering premium content to consumers and the only way to do that is by

using top-notch technology. Employees must have the ability to share their ideas

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digitally across different functional areas to complete tasks effectively. Also Time

Warner Inc. has been taking steps to becoming a “Greener” company that encourages

environmental stability. For example, HBO's information technology systems now

include software control of certain hardware, so that computers can be shut down outside

of working hours or turned on for necessary maintenance and upgrades.

(Timewarner.com) Mitchell A. Klaif is the Senior Vice President and Chief Information

Officer. He oversees the Corporate Information Technology Group and leads the

execution of Time Warner’s enterprise-wide information technology strategy.

(Timewarner.com)

D. Summary of Internal Factors (IFAS)

Internal Factors Weight Rating Weighted Score Weighted Comments

Strengths

Media and Workforce Diversity

Dominant Market Share

Digital Assets

Employee relations

Brand Image

0.10

0.15

0.15

0.05

0.15

3

3

4

4

4

0.30

0.45

0.60

0.20

0.60

Diverse viewpoint and ideas.

A leading brand in the media market

A significant portfolio of digital assets

Employees are taken care of and have room for growth

Strong and Good Reputation

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Weaknesses Revenue

Concentration in the U.S

Old ways of distributing media are becoming obsolete

Decline in movie goers

Performance in one operating division affects other divisions.

0.05

0.15

0.10

0.10

3

3

3

3

0.15

0.45

0.30

0.30

Approximately %70 of revenues come from U.S

Majority of Consumers prefer the new digital platforms over the old forms of receiving media.

Less consumers are spending money to go see feature films at theaters

If one operating division performs poorly it could affect another operating division

Totals 1.00 3.35

V. Analysis of Strategic Factors

A. Situational Analysis

Strategic Factors Weight Rating Weighted Score

Duration Comments

Digital Assets (S)

Dominant Market Share (S)

Brand Image (S)

Old ways of distributing media are becoming obsolete (W)

Revenue concentration in U.S (W)

Growing International Presence (O)

Positive outlook for OTT market (O)

.10

.15

.12

.15

.08

.08

.10

4

3

4

3

3

4.2

4.1

.40

.45

.48

.45

.24

.336

.41

Long

Long

Long

Long

Intermediate

Intermediate

Intermediate

Increase in Value

Leading Brand within Industry

Strong

New digital and streaming options

Profit in penetrating new markets

Expanding global reach

Enhancing presence in the over-the-top

25

Intense competition within the industry (T)

Decrease trend in T.V viewing (T)

.10

.12

4.0

3.8

.40

.456

Long

Intermediate

market

Competitive industry

T.V viewership declining

Total 1.00 3.622

B. Review of Missions and Objectives

Time warner Inc.’s current mission and objectives aim at exploiting their

strengths and overcoming their weaknesses. Time Warner Inc. is focused on becoming

the world’s leading video content company. Their dominant market share, brand image,

and large portfolio of digital assets will help in achieving this goal. Time Warner Inc.

also has an objective to harness technology and develop new business models to increase

the value of content to consumers and distributors. (TimeWarner, 2015) With the old

ways of distributing media becoming obsolete this objective will become increasingly

important. Time Warner Inc. will have to invest in R&D and develop new ways to

deliver and differentiate their media from competitors. Also with a high concentration of

their revenues coming from the U.S, Time Warner Inc. will have to come up with new

market entry and penetration strategies to implement their objective of increasing their

presence in international territories. New market entry strategies such as mergers,

licensing, or joint ventures may be of consideration in future years. Overall, Time

Warner Inc.’s mission and current objectives are attainable and will pull the company in

the right direction, giving them the tools and resources necessary to prosper in the newly

emerging digital content era.

VI. Strategic Alternatives and Recommended Strategy

A. Strategic Alternatives

26

Time Warner Inc. should consider a directional strategy toward growth into other

international markets. Time Warner Inc. could use a concentrated strategy to expand its’

global reach and gain more revenues in other countries through licensing and

acquisitions. In 2014, 68% of Time Warner Inc.’s total revenues came from the U.S.

which shows their lack of revenues in other geographic locations. (Annual Report) Time

Warner Inc. should expand its’ global presence and reach its’ full revenue potential in

other geographical locations through the implementation of a concentrated growth

strategy.

Another alternative strategy that Time Warner Inc. may want to consider is a

directional strategy toward growth by investing more into their over-the-top products

such as HBO GO and MAX GO. Over-the-top products allow the delivery of media

content over the internet. There has been a decline of consumers watching advertising-

supported cable networks in recent years and an increase in consumers using streaming

services such as Netflix and Hulu to watch their T.V shows. Time Warner Inc. must use

a strategy to pull consumers towards their streaming services, HBO GO and MAX GO,

over the competitor’s. They could do this by offering a lower price than competitors and

offering exclusive media content. Also they could look into a strategic partnership with

another streaming service to create more sought after product. Overall when it comes to

streaming services consumers want a product that delivers the best content and at the

cheapest price.

B. Recommended Strategy

I recommend that Time Warner Inc. should choose a concentrated growth strategy

into other foreign markets and increase its’ international presence through licensing and

27

the acquisition of a foreign company. Time Warner Inc. is headquartered in New York

City, New York and is highly dependent on the U.S and Canada for revenues. The

company recorded revenues of $27,359 million during the 2014 fiscal year and 69.8%

came from the U.S. and Canada. Although the company has presence in Latin America,

Europe, and Asia Pacific, as well, its’ revenue concentration does not reflect its’ global

footprint. (MarketLine)

Time Warner Inc. will acquire a foreign company through acquisition. By

acquiring a foreign company it would allow Time Warner Inc. the resources it needs in

order to penetrate the foreign market effectively. The foreign company may also allow

Time Warner Inc. to have distribution channels not previously available, along with a

local source to take care of proper promotions and logistics.

The demand for filmed entertainment is projected to grow world-wide in coming

years, due to the acceleration of online and mobile distribution of movies, lower

admission prices, and government policy initiatives in developing countries.

(MarkertLine) Time Warner Inc. could grow in international territories by licensing

exclusive media to foreign companies. For examples Time Warner Inc. owns the rights

to D.C comics, they could allow foreign companies to create their own content and media

using these comic-book characters.

VII. Implementation

The expansion into foreign markets by licensing and acquisition will require Time

Warner Inc.’s top management to develop programs in order to implement the

concentration strategy. Some programs for implementation include the following:

Culture Program

28

- This will help the new company in learning about Time Warner Inc.’s

company culture.

Integration Program

- This will help Time Warner Inc. CEO implement corporate culture into new

business.

- Training and development for new employees

- Program for providing resources

- Communication program between headquarters and foreign company.

Corporate functional areas such as human resource management and finance

should be responsible for the programs developed by top management.

International expansion takes planning, money, and time. But these programs

are reachable with Time Warner Inc.’s large net worth and financial strength.

These programs should be implemented once the acquisition is complete.

Also, programs should be developed by top management and corporate

marketing in order to implement the strategy of licensing and franchising in

foreign markets.

Program for buying advertising space and time

Program for review of licensed media

Program for review of fan-merchandise produced around licensed media

Program for review of foreign promotions and advertising being used to sell

media and products.

Time Warner Inc. should take part in promotional advertising in foreign markets.

Allow characters from DC comics appear in a foreign film and launch fan

29

merchandise centered on the character. Also Time Warner Inc. should review the

media that contains their content to ensure it is appropriate and aligns with their

brand image.

VIII. Evaluation and Control

In order to evaluate the successful implementation of the acquisition and

licensing tactics, financial measures must be used. Top management performance

as well as employee performance at the new company should be evaluated. Also

the new company will function as an operating company for Time Warner Inc.

and will be responsible for its’ own performance.

Time Warner Inc. will make the companies responsible that want to

license their material and send in written plans to be reviewed by

headquarters to make sure they meet proper requirement. If Time Warner

Inc. feels as though their content is being misrepresented in any way they

have the right to end the production of such material.

Time Warner Inc. has the ability and experience to implement such a

strategy. The concentrated growth strategy will be evaluated in terms of how

much it penetrates the foreign market and increases revenue. Also it will be

evaluated by how much Time Warner Inc.’s global presence has increased by

licensing its’ content and products. This will result in either sales for Time

Warner Inc. products increasing or sales of other media companies’ products

decreasing. If this strategy fails, management should take corrective action.

Corrective actions may include the following:

Reallocating Resources

30

Only allow prestige companies to use licensed material

Re-review new company’s strategies and objectives

31

Works Cited

Annual Report 2014. (2014). New York City, NY: TIme Warner.

"Kiplinger's Economic Outlook." Kiplinger. Ed. Kiplinger. 2016. Web. 16 Mar. 2016

Time Warner Inc. (n.d.). N.p.: Hoover's Inc.

Time Warner Inc. (2015). London, United Kingdom: Marketline.

Time Warner Inc. (n.d.). Retrieved from http://www.timewarner.com/