Category: Comcast

Introduction

In 2010 Comcast began to rebrand many of its services, including cable Internet access, cable telephone services, and digital cable (Bray, 2010, unpaged). According to the company’s representatives, the new brand called Xfinity is supposed to signify the multiplicity of choices that are available to the customers (Bray, 2010, unpaged).

However, many journalists as well customers believe that this change can be explained by the necessity to shed a negative image about the company, in particular, poor customer service (Bode, 2010, unpaged). This paper is aimed at discussing the rationales for this change, the previous business processes of this company, and possible impacts of rebranding on the company’s structure, work culture, and policies.

It is also necessary to determine whether rebranding will eventually boost Comcast’s financial and organizational performance. This assignment can throw light on the underlying causes of rebranding and organizational change. On the whole, the key task is to identify those factors which lead to rebranding and those changes may be entailed by this rebranding. These are the key objectives that have to be attained.

The rationale for Comcast Rebranding

Scholars believe that there are two drivers for rebranding: first, the company can pursue such a policy in order to better differential its products and services from those ones of their competitors. However, this change can be explained by the negative reputation of a company (Shroeder, Morling, & Askegaard, 2006; Donnelly & Linton 2009).

Under such circumstances a company needs to dissociate its products and services with negative images. It seems that the management of Comcast is attempting to achieve this objective.

First, it should be pointed that according to many customer surveys and especially the American Customer Satisfaction Index, in 2009 this corporation had the highest percentage of dissatisfied clients, more than 44 per cent. (The American Customer Satisfaction Index, 2011, unpaged).

These data indicates that in prior to rebranding Comcast ran great risk of losing its market share. Hence, the adoption of a new brand name Xfinity was probable the best solution for them. At least, it was the first step that they had to take under those circumstances.

It should be noted that at the present moment Comcast is considered to be the largest providers of cable television in the United States; additionally, this company occupies leading positions among telephone operators (Khariff, 2008, unpaged). The company represents the industries which are regulated heavily by the government.

Apart from that, the typical feature of these industries is a low threat of new entrants, which means that a new company, intending to enter this market has to possess a considerable starting capital (Albarran, 2002, p 89). The corporations, operating in this market are economies of scale, and it is very difficult to compete with them with by means of price differentiation.

Thus, these peculiarities led to the false sense of security among top executive managers of Comcast and eventually culminated into a situation, when a company could lose many of its clients. As a matter of fact, this difficulty is encountered not only by Comcast; it is typical of those companies, which have grown in terms of their financial performance and their structure.

The decision-making within such companies gradually becomes slower, especially if we are speaking about exchange of information among the company’s business units (Hodson & Sullivan 2008, p 168). Hence, we can say that Comcast is a typical example of such large and slightly bureaucratic company.

The main reason why too many clients decided to use the service of different companies was inadequate level of customer support in Comcast. Many of these people complained about inability to contact the executive officers of this company in order report about poor functioning of the network.

In fact, some conflicts with customers suggest that some managers of this organization were not particularly concerned about the needs of the clients. Furthermore, many complaints were caused lack of responsibility among the employees of Comcast (Oldenburg, 2005, unpaged). The most important thing immediately attracts attention is lack of transparency and integrity in relationships with the clients.

More importantly, for a very long time, the management of Comcast was not very interested in the monitoring of customer service and this indifference only contributed to its inefficiency (Oldenburg, 2005, unpaged). To some extent, these examples indicate before 2009 acted as a company, which was entirely sure of its position in the market.

The main reason for such organizational behavior was lack of competitors and very limited choices available to the customers. Yet, in recent years the situation has changed dramatically other companies began to target Comcast clients and many of these people accepted their offerings.

Thus, one can say that rebranding is an attempt to reestablish relationships with the customers; yet, at this point, it is not clear whether this attempt will succeed. The outcomes of this policy will depend on many factors such as ability of the management to involve employees into decision-making and offer powerful stimulus to these people.

Previous Business Processes

At this stage, we need to discuss the peculiarities of business processes within Comcast before 2010. This activity will increase our understanding of this company worked in the years before rebranding. Overall, the term business process is usually used to describe a set of activities which are performed in order to produce and deliver a product or service to the customer (Weske, 2005, p 5).

Business processes of a company can be essentially divided into three large groups: 1) managerial business processes; 2) operational business processes; and 3) administrative business processes such as financial reporting, HR management (Harmon, 2003). Therefore, we need to take into account these distinctions while analyzing the performance of Comcast.

Of course, one should not suppose that each business process is equally important for the management of Comcast. In this case, the most significant aspects are HR management, organizational reporting, post-sale services, and organizational structure. These business processes are essential for maintaining good relationships with the customers.

The first and probably the most important business process to be discussed is corporate management. Comcast is an organization which has a very complicated workplace hierarchy. This means that there are many barriers between the frontline personnel and top-management. This organizational structure inevitably leads to slow decision-making within the company.

This company is much departmentalized and each of these departments is run by a great number of executive officers (Comcast, 2011, unpaged). The second aspect that one should pay attention to is stakeholder management. The term “stakeholders” can be interpreted as those organizations and people, who are influenced by the company and who in turn can affect its performance (Polonsky, 2005, p 1065).

In the case of Comcast we can speak about shareholders, governmental agencies such as Internal revenues service, employees, customers and non-governmental organizations, for example, consumer unions. Judging from the numerous complaints about the quality of customer services, one can argue that the needs of the clients were often overlooked by Comcast.

Apart from that, strategic management of this corporation has long been based on the premise that they are the strongest market player and other firms will not be able to outrival them. This attitude toward the competitors is one of the company’s positioned weakened in later years.

Furthermore, when speaking about the corporate management of Comcast, we should also mention that the company’s executives believed that their cable services are the only alternative, available to the clients.

However, Comcast’s competitors like to Time Warner Cable or Charter Communications began to actively attract its customers, especially those, who were dissatisfied with their quality of Comcast services.

To some extent, such misinterpretation of the situation can be explained by the fact the management assessed performance according to financial criteria. However, customer retention rates were studied properly.

It is worth mentioning that high degree of departmentalization of a company makes company much more cumbersome and slow. In part this argument can be supported by the fact that it took Comcast a very long time to process the complaints of the customer and do repair work (Belson, 2006, unpaged). This information suggests that there was no efficient flow of information within the company.

Furthermore, one should remember that the employees of this company were given a very small degree of autonomy. In order to respond to the customer’s request, they had to receive permission from the managers, who occupied a higher position in the workplace hierarchy. Another important aspect that we cannot overlook is assessment of the company’s and employees’ performance.

Comcast relies on quantitative methods of measuring performance, (namely the ratio of operating income and loss), while overlooking the opinions of both clients and employees (The US Securities and Exchange Commission, 2009, p 69). As we have said earlier, before 2010, they did not attach much importance to such performance measurement as customer retention rates.

This is one of the reasons why they overlooked the growing dissatisfaction with their work. It is quite possible to hypothesize that Comcast would not have to resort to rebranding if they had adopted different standards of organizational reporting in the previous years.

Human resource management is another business process that we need to discuss. Comcast hires a great number of part-time employees, in particular, 6.000 workers out of 100.000 (The US Securities and Exchange Commission, 2009, p 13). These people do not have the same kind of benefits as full-time workers do, and it is quite probable that many of them are not fully motivated to perform their duties appropriately.

Apart from that, this company frequently employs third-party companies which provide them with operational support (The US Securities and Exchange Commission, 2009, p 15).

Comcast does not exercise full control over the work of these enterprises and it is possible that many of them do not meet the best quality standards. Hence, one can say that the employees of Comcast have different attitude and perceptions of their job and duties. Lack of culture that would support the best quality of services can be the underlying cause of customer dissatisfaction.

The efforts of Comcast management should focus on this problem; otherwise rebranding will not yield the expected results. At this stage, the most important task is to understand how the work of these people can be improved. For this purpose, they should actively involve this people into decision-making and let them express their views.

Finally, we need to speak about such business process as customer service. As it has been said before, this component of their work is continuously criticized by clients and journalists. Judging from the company’s financial statements, one can argue that this criticism is not unsubstantiated.

First, during the period between 2007 and 2008 Comcast reduced customer service expenses by almost 5.9 percent (The US Securities and Exchange Commission, 2009, p 28). In sharp contrast, administrative costs of Comcast is much higher than those ones related to post-sales services. Overall, this evidence shows that this company failed to become customer-centric.

For a very long-time Comcast has remained a bureaucratic organization with a very complex workplace hierarchy and too formal relationships among colleagues. Due to these policies, they could not respond to the changing market forces, in particular, the growing intensity of competition and increasing bargaining power of customers.

As a result, they reached a point when rebranding was the only viable solution; without it they would have found it very difficult to convince the clients that the company is genuinely willing to improve its work.

The changes, entailed by rebranding

It is quite probable that rebranding will affect several business processes within this corporation. First of all, we need to speak about HR management in Comcast. In the future, the assessment of employee’s performance will rely more on the customer surveys. This strategy will ensure that these people will have a stronger incentive to address the needs of the clients.

In addition to that, Comcast will establish full control over those third parties with which they cooperate at the moment. Among other expected effects of rebranding will be the reduction in the number of part-time employees. The thing is that effective customer service is hardly possible unless each worker is willing to contribute to the company’s success.

The employees act in this way only when they want to stay in the firm for a long time. In turn, part-time employees may not be very interested in it. Finally, companies like Comcast can hardly establish effective customer service without providing regular training the workers.

One should focuses only on short-term orientation programs offered to new hires in every company; a great number of scholars believe that training should be provided to workers at regular intervals, for example, every two or three years (Hakes, 1991, Morris, 2009).

These are the strategies the management of Comcast can implement in order to improve the retention of its clients. Again, one should not underestimate the possibility that many workers of Comcast can lack appropriate skills which are indispensible for good relationships with the clients. So, the management should place emphasis on providing sufficient training to the employees.

This corporation should also adopt new methods of measuring the company’s performance. At the present moment, they do it only by using financial data, such as operational revenues and costs. This approach does not give complete picture about the successes and failures.

The management of Comcast should also pay attention to the customer retention rates in order to determine the efficiency of rebranding policies. Most importantly, the adoption of this metrics will allow them to see how customers view the company and what areas need improvement.

They need to remember that organizational reporting should not be limited only to financial performance. Such an approach does not provide complete assessment of the organizational achievements or failures. The experience of Comcast eloquently illustrates the dangers, entailed by this approach to organizational reporting.

One can also expect the changes in the organizational structure of Comcast. As it has been noted in the previous sections of the paper, this corporation has a very complex workplace hierarchy and in many cases, this only slows down decision-making within the company. Hence, in the future the number of layers in the management hierarchy will be reduced, and many middle-line managers will be dismissed.

Again, one can assume that in the near future Comcast will become less departmentalized or fragmented. There is great likelihood that many employees, representing different departments, will soon form cross-functional teams. Cross-functional teams are a typical of matrix organizations which urge the employees with different skills to work on common projects or problems (Brickley, Smith & Zimmerman, 2002, p 113).

This approach will allow the company to better respond to the company’s complaints if they do occur. Thus, we can argue that the main business processes that can be changed are organizational reporting, HR management, the structure of the corporation and corporate management.

Comcast has to become more transparent in relationship with the customers in order to regain their trust and loyalty. Hence, future strategies of this enterprise should be focusing on these particular problems. Only rebranding will be of little or no avail to Comcast especially in the long term.

The point that they need to take into consideration is that Comcast’s positions in the market are no longer unrivaled. Such a view of the market situation can prevent them from making any progress. More importantly, such perception of the market does not allow the company to see the new trends in customers’ preferences.

Discussion

At this point, it is too early discuss the actual impacts of rebranding policy, pursued by the management of Comcast. The new brand name Xfinity will not bring the expected results to this company, unless rebranding will be accompanied by the changes in HR management, organizational structure, and performance assessment.

The management of Comcast should bear in mind that many customers are already skeptical of their innovations and the company will have to take a substantial amount of time and effort to prove that rebranding policy will really bring improvements for the customers.

These issues should be taken into consideration by the top executive officers of Comcast. As we have argued before the main driver of rebranding was the need to shed a negative image. Yet, in itself the change of brand name or logo cannot eliminate the underlying causes of this problem, such as bureaucratic structure, lack of performance standards, and high degree of fragmentation.

Hence, Comcast will be able to improve its relationships with the customers, only if they manage to resolve each of these problems. At this point, we can argue that Comcast or Xfinity should not expect rebranding to yield instantaneous results. Those organizational changes that we have described are usually very time-consuming, and the management should not expect to implement them a year or two.

The management should also remember that some members of the personnel will resist these changes in the business processes, and the duty of executive officers is to help these people overcome these difficulties. We have to emphasize the point that the proposed strategies will not be successful, if there is no close cooperation between the top-management and frontline personnel. These conditions are indispensible for the success.

Conclusion

There are several findings that one can derive from this analysis.

1. Large companies, which have grown in terms of their profitability and size, tend to become less attentive to the needs of their clients. Comcast is an eloquent example of such a company.
2. The growing complaints about Comcast can be explained by the fact this company lacks culture that can support the quality of services.
3. High degree of fragmentation inevitable slows down the decision-making within a company and makes it less responsive to the needs of the client.

It is possible to single out the following business processes, which can be changed: HR management, organizational reporting, post-sale services, and organizational structure. These are the key aspects that need to be addressed by the management of this corporation.

Overall, rebranding is way starting the relationship with clients from a clean slate. Yet, without in-depth organizational changes, this strategy will be fruitless. The example of Comcast illustrates the difficulties, faced by many large companies.

Reference List

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Belson. K. 2006 “Your Call Is Important to Us. Please Stay Awake”. The New York Times. Web.

Bode K. (2010) Comcast Xfinity Rebranding Largely Laughed At Analysts, customers aren’t particularly impressed. Broadband. Web.

Bray H. (2010). Comcast enters rebranding territory. Boston Globe. Web.

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Hodson R. & Sullivan T. (2008) The social organization of work. NY: Cengage Learning.

Khariff O. (2008). Say Hello to Unlimited Minutes. Bloomberg Businessweek. Web.

Morris J. (2009). Employee Training; A Study of Education and Training Departments in Various Corporations. General Books.

Oldenburg. D. (2005) “Demonizing the Customer”. The Washington Post. Web.

Polonsky. M. (2005). Stakeholder thinking in marketing. London: Emerald Group Publishing.

Porter. M. (2008). On competition. Cambridge: Harvard Business Press

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Background Information

Comcast and NBCU

Comcast Corporation is a leading company in the entertainment, information and communication industry. The company is located at One Comcast Center in Philadelphia. Since 1963, its major business has been management and operations of cable systems.

This covers cable connections namely provision of video, voice and internet services to domestic customers and business establishments in Columbia and 39 countries (Bake 2). Other services are Cable complex, broadcast television, Screen entertainment, funfairs as well as Comcast Spectator.

Ideally, Comcast Spectator subsidiary companies are Ovations Food Services, a food service establishment for sports and concerts. Philadelphia Flyers, Wells Fargo Centre a versatile arena in Philadelphia, and Global Spectrum that deals in facilities administration.

Some of Comcast’s achievements in 2011 include; a rise in merged earnings to $55.8 billion, consolidated working returns of 34.3% rose to $10.7 billion. A closure of NBCU Universal deal saw Comcast Corporations reap revenue of $14.5 billion and operating income of $1.4 billion. Its clientele vary from cable subscribers, internet clients to digital voice clients.

Conversely, NBC Universal, a global leading media and leisure company is involved in the growth, creation and promotion of entertainment, reports and information universally. NBC Universal is the holder and controller of various television networks, a company involved in motion picture.

It is also involved in television productions and controls media stations along with a universally known theme park. It was initiated in May 2004 after General Electric merged with Vivendi Universal Entertainment. NBC Universal is based in Rockefeller Plaza in New York. Its predecessor is Music Corporation of America. NBCU’S hosts such shows as The Tonight Show, Saturday Night Live and Sunday Night Football (Saari 7).

Merger

In January 2011, Comcast merged with NBC Universal and attained 51 percent of General Electric’s NBC Universal. Upon merger, the two formed NBC Universal LLC dealing in such assets as wire channels, theme parks and a movie studio. The transaction was not really a merger but an acquisition as General Electric would remain a minority in the shareholding.

This means that Comcast controlled the venture and would buy General Electric’s interests in the next eight years. Upon merger, the new body will have a board of five members, three from Comcast and two from General Electricals. The merger set out to start a new airing method known as TV Everywhere. This means that the customers would gain access to the media via internet by substantiating their traditional cable subscription (Bake 2).

Benefits of the merger

Since it was a vertical merger, it would harm competition either by exclusionary or collusion. Exclusionary would involve the foreclosure of an unallied downstream rival from accessing the joint venture’s upstream product and foreclosure of an unallied upstream rival from accessing the joint venture’s upstream product. Here the term foreclosure referring to strategies to raise prices and total exclusion.

Comcast would harm its rivals by blocking its rivals from accessing its video programming, withholding the access temporarily and increasing programming price in order to raise the competitors’ costs. The merger claimed to enhance innovation prospects by reducing the cost of synchronizing content development with the development of new media distribution forms.

From any market merger and acquisition that is viable, like that formed between Comcast and NBCU, it is perceived that it lowers the operations outlays or save costs emerging from the exclusion of double relegation of cost of programming. Increase in economies of scale also led to a reduction in costs.

The type of merger formed between Comcast and NBCU

Based on the market definition, it is apparent that the NBC Universal and Comcast merger combined the transactions of these two business entities. In the merger, the programming assets of Comcast namely its cable network interests such as versus, the Golf Channel and the regional sport networks were combined with those that NBCU held. The NBCU market assets included cable networks like the USA Network, Bravo, CNBC and MSNBC besides the universal film library studios and the NBC broadcast network.

The joint business venture that was formed between these two entities was under the control of Comcast (Bake 2). Thus, it made the merger transaction between NBCU and Comcast to be termed as vertical integration. This is because the major content provider was NBCU whereas the operation of Comcast happened mainly downstream in that content distribution.

Within the United States geographical milieu, Comcast is perceived as a global leader in the MVPD that is Multichannel Video Programming Distributor.

In fact, nationwide, nearly a quarter of the total MVPD subscribers in addition to over forty percent of the subscribers originating from seven out of the ten biggest metropolitan regions are Comcast clients. Comcast is equally the leading provider of broadband internet access in the United States areas (Bake 4). This clearly justifies why the transaction between NBCU and Comcast is considered as vertical merger.

Merger motives as stated by companies

Companies usually merge to gain several benefits. Amongst them are to gain access to a wider base of clients, reduce market competitions, increase their market shares, diversify their services and products , reduce overhead costs as well as to accelerate long-term business plans. These ideally included the motives that were stated by NBCU and Comcast.

Critical analysis of the stated merger motives

Often, firms would merge to craft a more efficient corporation and reduce the business operation costs. However, the merger between Comcast and NBCU does not necessarily reveal real cost synergies allied to this kind of joint venture. For instance, Comcast quoted that 99.9% employees who work for NBCU undertake business which hardly overlap with the businesses that Comcast pursue.

This implies that, since NBCU controlled a larger segment of the video content distribution, Comcast saw that it could derive some value from merging with NBCU (Saari 12). Conversely, NBCU was motivated by the fact that the largest broadband network and the largest paid television network in the US are owned by Comcast. This merger may enable these corporations to gain a wider video content distribution market share in the United States.

In reality, Comcast is the US king of internet business and TV business contents. The company also controls most its privately owned contents like few cable TV channels and local sports channels. Hence, the motive that solely drives Comcast to merge with NBCU is to control a lot more of the video contents and other cable channels distributions. In turn, the Comcast will be able to increase its profits and add on to its on-demand contents.

Merger Motives

From the market valuations of firms, it is true that based on merger motive number one, firms with low market values are actually undervalued. The answer is yes because the market value of any firm at a given period basically reflects on its market worth as depicted by the amount of assets such a firm possesses. If the balance sheet assets are valued low, then the firm is undervalued and vice versa.

On the other hand, it emanates that from the stipulated merger motives, the company management usually derive some mutual benefits from the merger.

In fact, company’s management usually sees that mergers generate several benefits. Amongst them are to gain access to a wider base of clients, reduce market competitions, increase the company’s market shares, diversify their services and products , reduce overhead costs as well as to accelerate long-term business plans. These included the motives that were stated by the management of NBCU and Comcast.

Market impact

Despite the derived benefits, the merger was anticipated to generate some negative market impacts. Basically, a merger between NBCU and Comcast received numerous antagonisms related to exclusionary and collusive. First, it was alleged that in case two rival firms such as NBCU and Comcast merge to collectively act be it through express or tacit collusion, chances are that they might raise products prices by reducing outputs.

Secondly, the merger between these two business entities may harm the level of market competitions on the non-priced dimensions such innovation and quality. The vertical merger may encourage the exclusionary conduct which may harm rivalry via the creation of coerced or involuntary monopoly or cartel (Bake 5).

Given that vertical mergers can facilitate collusion or exclusion that in turn harms competition, chances are that unaffiliated upstream rivals could face foreclosure from the access to the incorporated downstream firms businesses.

Through this merger, the market rivals to Comcast video distribution are bound to be foreclosed from accessing the joint venture video programming. It is also apparent that the level of video programming competitions would be harmed since the rival programming networks would be denied access to the customers affiliated to Comcast video distribution.

Works Cited

Bake, Jonathan 2011, Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis. Web.

Saari, Riikka, 2007, Management Motives for Companies Mergers and Acquisitions: A Research Proposal to be presented at Accounting Tutorial Turku School of Economics. Web.

The Primary Goal for Comcast of Acquiring Sky Plc

Every commercial organization aims to outstand its competitors and thus cover as larger a market share as possible. Currently, various methods of creating a competitive advantage exist, and, being one of them, mergers and acquisitions (M&A) are widely used to strengthen a company’s market position. Several factors can precede M&A, including a company’s strive for synergy, diversification, and concentration to survive the competition (Green, 2017).

The latter aspects can allow combining several businesses’ advantages and securing their weaknesses by penetrating deeper into a market and offering a broader spectrum of services. Therefore, Roberts, who is the CEO of Comcast, stated that the services of Sky Plc would help his company spread internationally and appeal to European customers rapidly (as cited in James, 2018). Moreover, Comcast, like other television corporations, has been suffering from the growing competition of video streaming businesses, such as Netflix, whereas Sky offers both streaming services and satellite television (James, 2018). As it is seen, the main goal of Comcast’s decision was to improve the positions in the national market and integrate into the European television segment.

The Primary Goal for Sky Plc Allowing Comcast to Buy It

While an acquiring company is required to make an offer, a target company keeps the right to either accept it or not. Recently, Sky has experienced severe competition, which later resulted in a rare auction between the major US buyers willing to acquire it. The winning $40-billion bid of Comcast considerably surpassed the bid of 21st Century Fox (James, 2018). Thus, this fact demonstrates that the wide price gap between the two proposals provoked Sky to agree to the arrangement.

The other goal that Sky may have pursued by accepting the acquisition is to strengthen the business in Europe and develop it overseas. The main opportunities Sky may want to use are Comcast’s readiness to work on Sky conditions and the US television contracts. The company has already arranged several exclusive deals in sports and television series broadcasting, so the ambition of the company may be to become partners with more significant media corporations.

The Factors That May Have Contributed to Sky Share Prices’ Growth.

While the stock market is an unpredictable mechanism, the contributing elements to the growth of share price can be only roughly determined. However, the further five factors may have had the most likely impact on Sky share price:

1. increased interest of major foreign investors,
2. revenue growth of Sky Plc in past two years,
3. recent customer base growth,
4. appropriate management, and
5. service uniqueness.

After Comcast and Fox started proactively trading over Sky Limited during the recent years (James, 2018), the demand may have increased due to the companies’ accelerated trading activity.

Investors, whose decisions affect the stock market, often pay attention to revenue indexes when deciding to acquire stocks. Sky Limited has been creating considerable revenue growth in the past two years (“Sky plc,” 2018).

A company can expect its price to grow as the result of customer base growth (Cohan, 2017). Sky Plc has recently spread its media services to several European countries and thus created again in customer base (James, 2018).

Qualitative management can lead a company to accomplish its goals. As the CEO of Comcast mentioned, Sky owns a team of competent managers, and its achievements are visible in the recently reached goals of Sky (James, 2018).

The services of Sky in Europe are unique due to the exclusive foreign contracts with HBO and other corporations, sports translation, and a streaming system that is in demand nowadays (James, 2018).

Analysis of Share Prices’ Monthly Return

A measured index for this question is share price monthly return. The data concerning Comcast and Sky’s share return is calculated using the share return formula and the monthly share prices of the firms (“Sky plc,” 2018; “Comcast Corporation,” 2018).

Actions of Shareholders

If a matter concerns the stock market, the ultimate decision can hardly be found. If one were a shareholder of Sky Plc, he would attempt one of two options: either sell the shares and thus create profit, or continue his ownership with an expectation of the company’s further growth in value (Bodie, Kane, & Marcus, 2017). As Sky demonstrates qualitative monthly share return and has recently participated in a promising merge, one should probably remain the share to the further increase in value.

A shareholder of Comcast would have to decide in a different way. On the one hand, Comcast has spent a large sum on purchasing Sky and now has difficulties with gaining share price, which is also demonstrated on the chart of share price monthly return. On the other hand, the acquired company may benefit the parent corporation by accomplishing the tasks set initially by the acquisition, and Comcast can grow in price noticeably. However, in either situation, a Comcast shareholder may need to purchase Sky stocks to diversify the risks.

Returns Discussion

The two companies’ share return analysis allows making several important conclusions. The Sky return proves to have a rather positive trend, while the Comcast return is rather in a flat position. While there was an increase in Sky and decrease in Comcast at the time of the deal, the charts tend to equalize eventually. Sky Limited demonstrates a larger increase in the index, which is possibly due to the investors’ attitude to the media firm after it was acquired for an unexpectedly large bid.

References

Bodie, Z., Kane, A., & Marcus, A. J. (2017). Essentials of investments. New York, NY: McGraw-Hill Education.

Cohan, P. S. (2017). Disciplined growth strategies: Insights from the growth trajectories of successful and unsuccessful companies. New York, NY: Apress.

Comcast Corporation (CMCSA). (2018). Web.

Green, M. B. (2018). Mergers and acquisitions. In International encyclopedia of geography: People, the Earth, environment and technology. (2018 ed., pp.1-9). Hoboken, NJ: John Wiley & Sons, Ltd.

James, M. (2018). Comcast outbids Fox and Walt Disney Co. with $40-billion offer for Europe’s Sky TV. Los Angeles Times. Web.

Sky plc (SKY.L). (2018). Web.

An Examination of the Comcast and NBC Universal Business Combination

Introduction

Comcast Company is one of the largest companies dominating the media and entertainment industry. The company manufactures cables that are used in the distribution of entertainment and sports news (Noam, 2001). The Comcast Company provides cables and broadband services in the United States. On the other hand, NBC Corporation is one of the biggest companies in the media and entertainment industry. In 2011, the company changed its name to NBC LLC. The headquarters of NBC is based in New York. Recently, the NBC LLC started operating as a subsidiary of Comcast Corporation. The merger between the two companies was created after the approval of Federal Communication Commission and the Department of Justice (Abelma & Atkin, 2011).

It was anticipated that the companies would adhere to the provisions of the Federal Communication Commission. There was fear that Comcast would restrict consumers from accessing the NBC programs. Notably, Comcast Company controlled the NBC Corporation. This is because it owned a majority of the shares of the NBC Universal Corporation. In situations where a company owns more than 51% of the other company, acquisition occurs and not a merger. Therefore, the strategy of Comcast Corporation and NBC Corporation was an acquisition. This is because Comcast Corporation owned a majority of shares in the NBC Universal Corporation.

Reasons as to why the combination between Comcast and NBC was potentially risky and rewarding

The combination between the two companies was risky. This is because the two companies were exposed to various risks by operating in the same industry. For example, Comcast Company was exposed to the risk associated with diversification. The company had few products to diversify. Therefore, through the merger, the company was forced to introduce the diversification strategy (Noll, 2001). Initially, Comcast Company was a service-oriented company. However, after merging with NBC Universal, the company started selling content and services products. In addition, both companies were exposed to the risk of new entrants penetrating the market. This scenario increased the level of competition in the market. This risk occurred as a result of failure by risk managers from the acquiring firms to assess the capacity of the acquired company. This aspect affected the companies in a number of ways, especially in regard to the trademarks and service marks. Comcast Company was exposed to the risk of lawsuits, and the company could be forced to pay damages. On the contrary, if the target firm (NBC Universal) received a letter prior to claiming the infringement, it would have exposed the acquiring firm to the risk (Abelma & Atkin, 2011).

In addition, Comcast Company was exposed to the risk associated with liabilities. This scenario could have happened if NBC Universal had any outstanding liabilities that would not have been disclosed before the enforcement of the agreement. The outstanding liabilities forced Comcast Company to incur substantial financial losses in repaying the outstanding debts. The above situation made the company undergo receivership. The merger between the two companies exposed the merging firms to privacy risk. This risk is prevalent among media companies. The risk occurs when companies are unable to maintain the confidentiality of the customer’s information. This can make the companies lose key customers. Finally, the two companies were exposed to portfolio insurance risk. This risk occurs when the merging companies have gaps in the insurance portfolios (Abelma & Atkin, 2011).

It can be asserted that the combination between the two companies aimed at bringing a lot of benefits to the companies. This is because the venture empowered the two companies. The companies speculated that they would dominate the media industry after establishing the merger. The companies had an objective of controlling the media industry in the US and Asia. The merger provided the two companies with a broad market for investment both in Asia and America. In return, this was to bring substantial profits and overall growth to the two firms. The companies also aimed at creating gender, ethnic, and racial diversity among different communities.

Speculations as to why General Electric may have wanted to divest itself from the management of NBC Universal

Financial performance of a firm in a given period may be assessed based on profits and losses that the company is making. This assessment determines the business strategies that can be adopted to make the situation favorable (Sherman & Sherman, 2011). Therefore, divesting involves selling some subsidiaries of a company that are not preforming well. The General Electric Company wanted to divest because there was economic downtown that the company was experiencing. The company focused on the production of electrical appliances and had numerous subsidiaries in various countries. In 1960s, the GE Company expanded its operations around the world. This led to the creation of many subsidiaries in many countries. As the number of subsidiaries increased, the management and operation of all business activities became complex (Abetti, 2011).

In 1986, the company purchased the American Radio Corporation (ARC), which was part of the National Broadcasting Company (NBC) at a cost of $6.4 billion. However, in 1987, the GE Company sold the ARC to a French company in exchange for Diagnostics Business. The company justified the selling by asserting that it intended to reduce its size so as to compete successfully with large companies. On the contrary, critics argued that the company was evading foreign competition by making such a decision. Others argued that the company was affected by the economic recession that was prevalent during that period (Twair & Twair, 2010).

The business combination and consideration made between the two firms

The business combination of Comcast Corporation and NBC Corporation was more of an acquisition rather than a merger of equal or joint ventures. In mergers of equal companies, the companies have equal contribution. The number of CEOs is equal in the merging firms (Sherman & Sherman, 2011). However, this was not the case in the combination of the two firms. It can be observed that there were some considerations that Comcast Company was to execute prior to acquiring the NBC Company. It has also been reported that Comcast bought fifty one per cent of the stocks of the NBC Company.

The strict considerations were set by the Federation Communication Commission (FCC). Among the consideration, Comcast Company was to give some management rights to Hulu Company, which was owned by NBC Universal and Walt Corporation. Comcast Company was supposed to make its streaming services available to NBC Universal. The Federation Communication Commission required Comcast Company to make broadband services available to customers at $49.5 each month in the subsequent three years (Sherman & Sherman, 2011).

The aim of these considerations was to prevent Comcast Company from becoming a monopoly. Absence of the above considerations forced the customers of Comcast Company to purchase cables and broadband services from the NBC at an exorbitant price. Therefore, Comcast Company was supposed to acquire fifty one per cent of NBC Universal stocks. This strategy was to be implemented after complying with all conditions as stipulated by the Federation Communication Commission (FCC). The commission intended to ensure that there was a fair competition between Comcast Company and other companies that were operating in the same industry (Abelman & Atkin, 2011).

Discussion on whether the combination was successful and how success is being measured

The strategy to combine the two firms was successful. This is because the two firms became a powerhouse that controlled almost all media activities. Additionally, the Comcast Company experienced a capital appreciation of 7.4% annually as a result of such business combination. On the other hand, shareholders of the Comcast Company received an additional dividend that made the returns increase from 7.4 to 7.8 per cent annually (Abelma & Atkin, 2011). Therefore, many firms use shareholders’ returns to measure the success of mergers and acquisition as discussed in this context.

Conclusion

The strategy to combine the two companies was successful as indicated by shareholders’ returns. However, despite the success, the companies were exposed to risks associated with mergers and acquisition. This had a negative impact on the performance of the companies given that the situation was not addressed. It is important for companies to assess the market situation before creating strategies to merge with other companies. All the risks associated with mergers should be calculated to reduce the probability of the mergers failing.

References

Abelman, R., & Atkin, D.J. (2011). The televiewing audience: The art and science of watching TV. New York: Peter Lang.

Abetti, P.A. (2011). General Electric at the crossroads: the end of the last US conglomerate? International Journal of Technology Management, 55(1), 345-368.

Noam, E.M. (2001). Interconnecting the network of networks. Cambridge, Mass: MIT Press.

Noll, A.M. (2001). Principles of modern communications technology. Boston, Mass. [u.a.: Artech House.

Sherman, A.J., & Sherman, A.J. (2011). Mergers & acquisitions from A to Z. New York: American Management Association.

Twair, P., & Twair, S. (2010). Campaign Aims to Divest State Funds From Corporations Enabling Israeli Occupation. Washington Report On Middle East Affairs, 29(9), 42-43.