Course: Diploma of Business Studies (DBS)

Module: Principles of Management BMGT1002D

Essay Title: Assessment of RTE Television's Operational Environment

Submitted by: Jake Murray

Student Number: 08665788

Lecturer: John O'Brien

Word Count: 2424

Submission Date: 2nd November 2015

Introduction:
Raidi Teilifs ireann (RT) is a semi-state company (statutory body) that is the national public
service broadcaster of Ireland. It is externally regulated by the Broadcasting Authority of Ireland.
RT was chosen as the subject for this assignment based on several factors. The two main reasons
being the unique position of RT within the marketplace as an organisation whose revenue is
almost a 50/50 split between advertising revenue and public funding (RTE 2015) and the public
availability of information such as annual reports, broadcasting acts etc. The authors experience of
working within film and television broadcasting industry was also a factor. This assignment will
focus on RTE's Television broadcasting division, RTE Television. This assignment will assess the
internal and external environment that RT, specifically its Television and Radio divisions, operates
within. This assessment will use the PESTEL framework, Porters 5 Forces and a Culture Analysis
of the environment in which the organisation operates. Each of these tools will be defined,
explained and evaluated prior to their application.
PESTEL Framework general environment
A PESTEL analysis is a technique for identifying and listing the political, economic, social,
technological, environmental and legal factors in the general environment most relevant to
an organisation (Boddy, Paton 2011 P664).
The analysis in Fig. 1 is intended to highlight the political, social, technological, environmental and
legal factors most relevant to RTE in the author's opinion. The biggest changes in the general
environment are socio-cultural. Ireland has undergone a period of rapid social change over the last
twenty years. Expectations and criticism of broadcast content is at a high point in Irish history.
Alternatives to TV entertainment abound and as traditional family values, gender expectations and
attitudes towards sexual orientation change, it becomes increasingly difficult to appeal culturally
and artistically to this newly fragmented audience. This lack of mass appeal, 'one size fits all'
programming results in an equally fragmented advertising landscape.
Carrying on from this is the second largest change in the general environment, which the author
considers to be economic. The financial crash of 2008 resulted in rising unemployment which
caused lower tax revenue and decreased consumer demand. Considering the dual funded nature of
RTE this was a change in the general environment that hit doubly hard.

Fig.1

Five Forces Framework Competitive Analysis

"Five forces analysis is a technique for identifying and listing those aspects of the five forces most
relevant to the profitability of an organisation at that time." (Boddy, Paton 2011 p632).
Porter (2008) identifies the five forces that shape industry competition as the bargaining power of
suppliers, the bargaining power of buyers, the threat of substitutes, the threat of new entrants and
rivalry among existing competitors. Porter (2008) also asserts that industry structure (represented as
the five forces) determines the industrys long-term profit potential. It is not determined by transient
factors such as growth, government or innovative technology. The technique is used to evaluate the
underlying forces that determine competition and profitability, not the attractiveness of an industry
(Porter, 2008).
Bargaining Power of Suppliers
If a supplier is powerful then one of the primary ways they may reduce the profitability of industry
participants is by raising prices (Porter, 2008). For a supplier to be considered powerful, they can
be more concentrated than the industry they sell to, they may service many industries or the
industry they supply may face serious switching costs in changing suppliers (Porter, 2008). For
example, Intel is the leading global supplier of microprocessors to the personal computer industry.
The PC industry is fragmented among many rival companies, each engaging in price gouging as the
market matures and consumer demand slows. Intel supplies 80% of the PC markets processors and
services and its diversification into processors for data centre servers and flash memory chips has
offset falling revenue from the PC industry (King, I. 2015)
Bargaining Power of Buyers
Powerful buyers generally reduce profitability by pressuring price reductions or demanding better
quality goods or services (Porter, 2008). Porter asserts that a buyer is powerful if there are few
buyers, if the industrys products are not unique and can be purchased elsewhere and if there are
few switching costs for vendors. An example of a buyer with strong bargaining power is a purchaser
of utilities such as electricity, gas or water. These utilities are generally provided through the same
grid and at at the same level of quality regardless of the service provider. There are also few, if any,
switching costs. The primary tactic for attracting new customers in these industries is competitive
pricing which lowers profitability.

The Threat of Substitutes

Substitutes limit profitability by providing a product or service that can fulfill the same or similar
function by a different means (Porter, 2008). Porter explains that the primary threat posed by
substitutes is rooted in price-performance trade-off. Mobile devices such as iPhones and tablets
are, generally speaking, inferior to DSLR cameras and laptops as image capture devices and
personal computers respectively. However the performance a mobile device provides in both of
these areas is often relatively high considering their low cost in relation to buying a full camera and
computer kit.
Threat of New Entrants
The threat of new entrants to an industry puts a cap on profit potential (Porter, 2008). If the threat of
entry is high then current industries must keep prices down to avoid being undercut by new
entrants. They may also need to spend on lobbying government in order to amplify what Porter
refers to as barriers to entry. These barriers relate to economies of scale, access to distribution
channels, capital requirements and customer switching costs (Porter, 2008). A buyout is one way
to neutralise the threat of new entrants. Facebooks purchase of WhatsApp for $19 billion was a
deliberate move to absorb a potential competitor that was showing higher levels of engagement
than Facebook itself, especially in emerging markets (Chatterjee and Ahmed, 2014).
Rivalry Among Existing Competitors
High rivalry drives down an industrys profits. Price wars and customer poaching, which is difficult
to avoid if the rivals are of equal size, is especially destructive (Porter, 2008). However Porter does
include a clause determining that non-price rivalry "is less likely to erode profitability because it
improves customer value and can support higher prices. He also notes that with proper market
segmentation rivalry can increase profitability.
Five Forces Analysis of RTE
RTE produces radio and television broadcast programming for public consumption. The geographic
scope of the competition is generally limited to Ireland and the United Kingdom.
The two main buyer groups are public consumers who pay an annual license fee to access television
programming and advertisers who pay for time in between programming. The bargaining power of
buyers can be seen as moderate in relation to RTEs position within the industry. The legal
requirement for every owner of a television set or satellite decoder to pay an annual license fee
ensures revenue for RTE regardless of viewer numbers. A consumer may choose to pay for a rivals

service but this will have little impact on the state broadcasters revenue through the license.
However, this buyer group is small compared to other markets making each purchasing decision in
relation to a TV license a more powerful act on the part of the consumer. This legal requirement
also lowers the bargaining power of advertisers as RTE is only partially dependent on ad revenue.
The main supplier groups are independent production companies and equipment providers. These
groups also have weak bargaining power with the arguable exception of equipment providers. The
various third party production companies that produce programmes for RTE are fractured, have few
other local industries to supply to and do not have a switching cost. RTE also has facilities to
produce programming in-house. This allows for a natural cap on the rates that third party suppliers
can charge. Equipment and technology providers have a stronger bargaining position however as
the technology required to produce, edit and broadcast media is concentrated to a handful of
suppliers. Much of the software and hardware are integrated into workflows that incur very high
switching costs.
Competitors include subscription based TV providers, such as Sky or Virgin Media and
other publicly available stations such as TV3, TG4 and UTV. Rivalry among these existing
competitors is mostly benign. RTE provides programming that is largely confined to an (English
speaking) Irish cultural context. Its competitors rivalry is not based on poaching viewers or
advertisers but on providing content targeted to different market segments, best described
as positive sum rivalry (Porter, 2008). TG4 appeals very specifically to a Gaelic speaking
audience, UTV offers regional programming for Northern Ireland and TV3 is largely a vehicle for
licensing and rebroadcasting programming from the UK and US.
Internet distribution channels for video and audio content are the main substitutes. YouTube,
Netflix, Spotify and piracy are some examples. These represent the strongest force that could reduce
the profitability of RTE. Using these services does not require a television set and so removes the
need to purchase a TV license. The price-performace trade-off for many of these services is
extremely attractive as they are either entirely free (in the case of piracy), rely on minimal
advertising (YouTube) or have free and premium offerings (Spotify). Netflix has in recent years
begun offering original, high quality, programming. This makes it a serious substitution for any
broadcaster. All of these channels also have another significant advantage over traditional
broadcasters as they offer on-demand access to programming. They can also offer targeted
advertising and offset costs by selling user data, an option not available to television broadcasters.

There are few potential entrants in this industry. UTV Ireland is the most recent and poor first year
performance contributed to parent company UTVs decision to sell its assets to ITV. The effective
market segmentation by other competitors and high capital requirements led to the decision
(Slattery and Reddan, 2015).
Cultural Analysis- Internal Analysis
Organisational culture can be defined as the pattern of underlying assumptions within an
organisation that is taught to new members as the correct way to think and feel about problems of
external adaptation and internal integration (Schein, E 1984). There are multiple levels of analysis
applicable to organisational culture, this author's analysis of RTE will focus on cultural values.
Cultural values can be divided into assumptions, non-debatable, taken-for-granted values, and
espoused, debatable values which are more appropriately represented by the term 'values'. (Schein,
E 1984). A critical incident in the recent history of RTE and the organisation's response is worthy of
analysis in order to identify a significant culture shift within the organisation. The global recession
that began in 2008 had an adverse effect on the profitability of RTE. After barely breaking even in
2008 the organisation began operating at a significant deficit for the year ending 2009 (RTE.ie,
2009). The organisation continued to operate in the red for another two years until major
restructuring took place in 2012. Hundreds of staff left the organisation through voluntary exit
schemes and although this incurred a large one off restructuring cost, RTE produced small surpluses
in 2013 and 2014 (RTE, 2015). For the purposes of this analysis we will identify RTE's Director
General, Noel Curran, as the creator of the new cultural identity within RTE.
In it's 'vision, mission, values' statement, set forth by the Director General, RTE's declared mission
is to provide an accurate and impartial news service, value for money, quality content and to reflect
Ireland's regional diversity (RTE, 2015). These values and the internal restructuring at RTE have
taken place over a period of five years of uncertainty and under the same Director General. In this
sense it can be argued that RTE has a strong culture given the stability of the executive group's
membership and the intensity of the group's shared experience over the period (Schein, E 1984).
Schein points out however, that a strong culture is not necessarily a guarantee of strong
performance, He suggests that older groups may be more effective with a weak total culture and
diverse subcultures to enable them to be responsive to rapid environmental change.
The major theme seems to be that cost savings and restructuring are seen as the best way to increase
profitability in the face of decreasing advertising revenue. However, attention has also been paid to
further developing and enhancing RTE's online presence through mobile apps and on-demand

streaming (RTE, 2014).

Conclusion/Recommendations
This analysis suggests that RTEs profitability should benefit from playing third party suppliers off
against each other in order to reduce labour prices. Alternatively, committing to producing more
content in-house after the last several years of restructuring could also help lower costs Diversifying
the technology used in video production and editing would also reduce the bargaining power of
suppliers as workflows would not be solely dependent on suppliers like Avid. The author would
strongly recommend that RTE continue to push for the TV license to be extended to encompass
personal computers capable of using streaming services (effectively all of them) as well as
pressuring the government to increase rates of compliance with regards to payment. This will
reduce buyers bargaining power further and mute the threat of internet based substitutes while
providing a revenue boost that can be used to promote further development of digital and mobile
markets. The new culture of RTE that acknowledges the importance of leanness and its need to
move from a public service broadcaster to a public service media organisation (RTE, 2014) is a
healthy one. This should be carried forward as a permanent part of the organisational culture as
further challenges in the digital space present themselves.

Bibliography:
Boddy, D. and Paton, S. (2011) Management: an introduction, 5th ed, Financial Times Prentice
Hall, Harlow.
Chatterjee, S. and Ahmed, S. I. 2014, 'Wall Street sees sense in Facebook's $19 billion WhatsApp
buy', Reuters, 20 February. Available at: (http://www.reuters.com/article/2014/02/21/us-whatsappfacebook-research-idUSBREA1J14A20140221) (23 October 2015)
King, I. 2015, 'Intel Forecast Shows Rising Server Demand, PC Share Gains', Bloomberg Business,
15 July. Available at: http://www.bloomberg.com/news/articles/2015-07-15/intel-forecast-showsserver-demands-makes-up-for-pc-market-woes (26 October 2015)
Porter, M. E. (2008) The five competitive forces that shape strategy Harvard Business Review, 86
(1) 79-93.
Raidi Teilifs ireann (2009). Annual Report 2009.
Available at: http://www.rte.ie/documents/about/RTE_annual_report_%202009_eng.pdf (Accessed
10 October 2015)
Raidi Teilifs ireann (2015). Visions, Mission, Values.
Available at: http://static.rasset.ie/documents/about/vmv-booklet-web.pdf (Accessed 10 October
2015)
Raidi Teilifs ireann (2014). Director General Says.
Available at: https://static.rasset.ie/documents/about/rte-ar2014-director-general-says.pdf (Accessed
10 October 2015)
Raidi Teilifs ireann (2015). Annual Report 2014.
Available at: https://static.rasset.ie/documents/about/rte-ar2014.pdf (Accessed 10 October 2015)
Schein, E. (1984) Coming to a new awareness of organizational culture Sloan Management
Review, 25 (2) 3-16

Slattery, L. and Reddan, F. 2015, 'ITV to acquire UTV channels in 100m deal', The Irish Times, 19
October. Available at: http://www.irishtimes.com/business/media-and-marketing/itv-to-acquire-utvchannels-in-100m-deal-1.2397259 (29 October 2015)

Confirmation Certificate
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Student Name: Jake Murray

Student Number: 08665788
Date: 28/09/15

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