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Case 4.3 Encyclopaedia Britannica, Inc. (B)

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Lotte Griffiths

on 31 October 2014

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Transcript of Case 4.3 Encyclopaedia Britannica, Inc. (B)

Introduction to EBI
EBI's Response
Jacob Safra Strategy
History of EBI
By Nich, Lotte, Olivia and Elliot

Case 4.3 Encyclopaedia Britannica, Inc. (B)
EBI’s response to the digital revolution
Suggested strategy for Jacob Safra
Recommended control systems for EBI
Control Systems
EBI’s goal - ‘To become the most trusted source of information, knowledge and learning in digital media’

Management control systems should either encourage the creation of
premium value
for customers or create
low cost and efficiency

Competitive Advantage:
Differentiation - quality

Ineffective response to Microsoft

What strategy should Jacob Safra follow to get EBI back on track?
Definition of strategy - A long-term plan of action designed to achieve a particular goal.
EBI's Poor Situation
New competitors entering market.
EBI too slow going digital.
Many customers lost.
Porter's five forces model (1980)
Bargaining power of customers.
Threat of new entrants.
Intensity of competitive rivalry.
Bargaining power of suppliers.
Threat of substitute services.
SWOT Analysis
Strengths: Dominating market, reputation, have resources.
Weaknesses: Slow going digital, tentative of future.
Opportunities: Digitalization, new era of EBI on the horizon.
Threats: New competitors, good employees leaving.
EBI's Strategy in the Early 1990's
'Single industry' corporate strategy - required differentiation.
Innovative? - Could have "created the market" but ended up being "late in the game".
'Reactor' strategy.
What Strategy should Safra follow?
'Prospector' strategy.
Digitalization and CD sales.
Come in-line with competitors.
Competitive advantage through superior reputation.
Offer incentives to best employees.
What did Safra actually do?
Similar strategy to our suggestions - and successful!
"To become the most trusted source of information, knowledge and learning in digital media."
Disbanded door-to-door sales.
Slashed prices.
Opened new revenue streams.

Control Systems
EBI and their employees – 401k elimination and lack of pay rises

Organic Management Control System?

Tight Control System - Managers are evaluated against budgets

Resource Allocation – ICT system & Marketing are high priority

EBI’s finances and zero-based budgeting
EBI's Initial Response
1981 - Electronic version of the encyclopedia offered to businesses

1989 - Comptons Encyclopaedia published on CD for schools and libraries, increasing margins

1989 - Sales strategy changed to door-to-door selling

1990 - Record high revenues achieved

1993 - Microsoft entered the market with Encarta with a cheaper product costing $100

EBI's Response to Microsoft
Sale of Comptons unit for $57m

Including free CD with the purchase of any set of encyclopaedias

Subscriptions offered to target universities

1995 EBI reduced the cost of their CD to $200
Revenues halved to $325m by 1996

Microsoft became a dominant player in the market

New leadership implemented
Safra should follow a strategy of cutting costs and prices
Management, budgeting and resource allocation
Thank you for listening.
Any questions?
Full transcript