BUSINESS STRATEGY FOR LOCAL TELEVISION STATIONS IN THE UK JOSEPH ANDREW BREEDLOVE

BA UNIVERSITY OF NORTH CAROLINA AT GREENSBORO

1919502 AUGUST 2011 SUPERVISED BY DR. JOHN IZOD

Dissertation submitted in partial fulfilment for the degree of Master of Science in Media Management Film, Media and Journalism University of Stirling 2010-2011

Abstract
There has been some interest in the field of strategic management in broadcasting, but little attention has been given to local television broadcasters. Therefore, I tackled the issue of business strategy of local television stations in the UK. The system discussed in this project is a hypothetical adaption of one that does exist in the US. Organisations like United for Local Television, along with Jeremy Hunt, Minister of Culture, Olympics, Media and Sport, have raised considerable interest in developing a sustainable local television system. I have set out to present pertinent information about the strategic positioning and the development of strategy for these potential local television stations. I have used previous studies to structure my argument and present useful data that contributes to the discussion. Data was collected from government reports concerning local television in the UK, as well as, case study materials- collected through interviews and other reports- from nations with strong local television systems. The results yield two models that managers can apply in order to develop their strategic position and create strategic goals and actionable timelines for their organisation.

Attestation
1. 2. 3. 4. This work is composed by me. This work has not been accepted in any previous application for a degree. The work of which this is a part is done by me. All verbatim extracts have been distinguished by quotation marks and the sources of information have been specifically acknowledged. 5. The word count for this work, excluding appendices and bibliography, is 12,978 I understand the nature of plagiarism, and I am aware of the Universitys policy on this. I certify that this dissertation reports original work by me during my University project except for the following: The model discussed in the literature review in Chapter 1 and included in Appendix 2, Figure 2.1, was taken from Chan-Olmsteds Issues in Strategic Management (2006, p. 176). The models discussed in Chapter 3 and included in Appendix 3, Figures 3.1, 3.2 and 3.3, respectively, were taken from Porters The Five Competitive Forces that Shape Strategy (2008, p. 80), Lewis and Lawtons The Four Functions of Organizations--Where does the individual fit in?(1996, p. 222) and Scheins Cultural Model, found in found in KngShanklemans Inside the BBC and CNN : managing media organisations (2000, p. 20). The model discussed in Chapter 4 and included in Appendix 4, Figure 4.1, was taken from Chan-Olmsteds Issues in Strategic Management (2006, p. 175).

Signature:

Registration No.: 1919502 Date:

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Acknowledgements
I would like to thank my advisor, John Izod, for the guidance and perspective he provided throughout the development and completion of this project. His constructive advice has contributed a great deal to my work. It was a privilege to interview local station managers in the US, and I owe sincere thankfulness to them for their thought provoking observations. I would also like to thank my classmate, Jrdis Gther, for continually challenging me to reassess the focus and structure of my dissertation. I am thankful and indebted to my good friend and former colleague, Andrew Busam, for providing feedback and support. Additionally, I would like to thank, Neil Blain, for helping me brainstorm and focus my research. I would be remiss if I did not mention and thank my former employers, Herbert Greenberg and Sandra Smith, whose passion for local television and continued support has been an inspiration to me. Last, but certainly not least, I owe a great deal of gratitude to my family for encouraging and supporting me through my many endeavours.

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Table of Contents
Abstract ...................................................................................................................... i Attestation ................................................................................................................. ii Acknowledgements ..................................................................................................iii Table of Contents ..................................................................................................... iv Introduction ............................................................................................................... 1 1 Literature Review ................................................................................................... 3 1.1 Media Market, Scarcity and Strategy .............................................................. 3 1.2 The Local Market ............................................................................................ 6 1.3 Defining Local ................................................................................................. 7 2 Research Methods ................................................................................................. 9 3 An Overview of Strategy...................................................................................... 13 3.1 Defining Strategy........................................................................................... 13 3.2 Models for Strategic Planning ....................................................................... 14 3.3 Organisational Structure ................................................................................ 15 3.4 Resources ....................................................................................................... 16 3.5 Core Competencies ........................................................................................ 16 4 Strategy and Broadcasting .................................................................................... 19 4.1 Developing Strategy ...................................................................................... 19 4.2 The New Media Market................................................................................. 20 4.3 Resources and Diversification ....................................................................... 21 5 Strategy in Local Television in the UK ................................................................ 25 5.1 Need for Local ............................................................................................... 25 5.2 The Shott Report............................................................................................ 26 5.3 Case Studies ................................................................................................... 28 5.3.1 Local Television in the US .................................................................. 28 5.3.2 Tawain Satellite Companies ................................................................ 31 5.3.3 Local Television in Basque country, Spain ......................................... 32 5.4 Strategies for Local Broadcasters .................................................................. 33 Conclusion ........................................................................................................... 35 Reference List ......................................................................................................... 36 Appendix 1 .............................................................................................................. 41 2.1 Strategy Map by Chan-Olmsted .................................................................... 41
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Appendix 2 .............................................................................................................. 42 3.1 Five Forces Framework by Porter ................................................................. 42 3.2 Organisational Functions by Lewis and Lawton ........................................... 43 3.3 Culture, Strategy and Environment by Schein .............................................. 44 Appendix 3 .............................................................................................................. 45 4.1 Media Taxonomy by Chan-Olmsted.............................................................. 45 Appendix 4 .............................................................................................................. 46 5.1 Determining Strategic Position...................................................................... 46 5.2 Firm-Level Strategy....................................................................................... 47

Introduction
There has been renewed interest in developing a local television system in the UK. Jeremy Hunt, Secretary of State for Culture, Olympics, Media and Sport, has led the drive to develop a new and sustainable local system. The recently published Shott Report discusses the viability of local commercial television which will provide services to ten different markets in the UK. Previous attempts to establish local television have fallen before they could take off, or the organisations were unable to develop appropriate models to sustain the venture (Department of Culture, Media and Sport 2011,p.13). Cost, lack of interest and commitment to public-service are a few reasons why local television has had trouble in the UK. The Shott Report presents its answers to these issues, but a gap still exists between the answers and the solutions to the problems of local television. Many of the issues can be managed if appropriate techniques are applied. Business strategy addresses resource management and the development of long-term goals that considers internal and external competitive forces that an organisation will face (Porter 1979,p.137). Renewed interest in local media will not relegate the issues previously faced. However, a commitment to business strategy will prepare managers and organisations to better deal with these issues and build sustainable local television operations. This project addresses some strategic decisions local station managers might consider in order to build successful media organisations. Data has been collected from a government sponsored report that discusses the viability of local television in the UK, as well as information collected from cases in the USA, Taiwan and Spain. The literature review, in chapter one, presents previous studies and themes that contributed to the development of this project. I discuss the influence of media economics by focusing on the unique characteristics of the media industry and the need to develop strategies that account for these elements. However, much of the material does not address local economic characteristics. In order to address this, the review moves on to discuss some firm-level strategies, as well as cultural considerations that can affect local media systems. Additionally, I discuss important business strategy materials that provide vital framework materials for the data presented later. In chapter two, I layout my research methods and discuss how I collect and present data. I focus primarily on how I collected materials from the Shott Report and compared the information to the data from the case studies. I have carried out interviews with station
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managers in the USA, and I use this chapter to address my selection of managers, markets and their application to this project. Furthermore, I discuss some of the variables and limitations of my approach. Chapter three highlights strategic models and structures used to create a strategic assessment for this project. This chapter presents a definition for local media strategy. I also use this chapter to discuss elements of an organisation that contribute to the development of strategy. This chapter does not address local media strategy, but the information presented in this chapter will move the discussion towards specific strategic devices that can be applied to the broadcasting industry. Chapter four will draw from existing studies and literature to highlight the characteristics of strategic management in broadcasting. This chapter addresses shifts in market power, technological capabilities and resource allocation and discusses how they have transformed the media industry. Furthermore, I look at how these elements affect strategy. This chapter leads our discussion to our main section of analysis concerning strategic management at the local level in the UK. Chapter five utilises the data from the Shott Report and the case studies to develop the premise of this project. This chapter combines the material from previous chapters, as well as data from the report and case studies, to present a model for strategic positioning and for developing firm-level strategies. The strategic positioning model is designed specifically for the local system in the UK. The composition of a firms strategic position- along with their competencies, competitive advantage and long term goals- form the basis of a local broadcasters strategy. The material presented here can be used by managers to develop

strategies for their organisation.

Chapter One: Literature Review

The objective of this literature review is to present some primary sources used to develop the theoretical framework around strategic management of local television. A main theme throughout this project is the interconnectivity of the television medium in academic and professional fields. Although this project focuses on a specific sector of the media, we widen our approach to gain insight from other industries and apply business principles that may be transferable or modified to fit our setting. It is important to note, incorporation of the different approaches was found to be necessary to understand the complexity of local television. Reliance on business or economic theory alone would not supply us with the proper structure to identify trends and themes within the industry, nor provide adequate academic knowledge. There has been extensive work in the field of media economics to explicate economic principles that govern the media (Picard 1989, Doyle 2002, Albarran 2006 and Einstein 2004). However, many of these works are fit for application within globalised markets. This project is concerned with the economics of local television and cannot justify the application of some of economic principles without assessing the potential harm it would cause local stations. In this chapter I have set out to identify the theoretical concepts that are interwoven throughout this project. Mainly our focus will be in and around the economics of television and strategic management of media firms. There has been interest in building a commercially viable local broadcast system in the UK. I have set out to address some issues local stations will face and how managers can develop strategies to stay competitive and sustainable. I will discuss key contributions to strategic management and media economics then some of the unique characteristics of local media systems.

1.1 Media Market, Scarcity and Strategy

The traditional approach to media economics has been concerned with the dualproduct nature of media products (Albarran 2010, Napoli 2003, Picard 1989). Broadcasters manage programming, audience, and distribution markets concurrently. The ability to capture the audience will determine the levels of success and control a broadcaster has in a market (Napoli 2003). However, this approach does not account for public service broadcasting. PSB is based on responsible broadcasting that provides important information services to the citizens it serves. The BBC is a highly regarded and easily recognisable PSB
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and has shaped the television system in the UK since its creation (Curran and Seaton 2010,pp.105-107). Aldridge discusses some of the issues around a market driven broadcast system and those of a PSB system (2007). In comparison, local broadcast systems in the US have been successfully working in a market driven system for decades. However, there are concerns over this type of system in the UK (Aldridge 2007,p.79). Aldridge analysis of the UK broadcast system sheds some light on the historical and current problems a local system in the UK would face. Her work provides useful framework for understanding the issues a commercially driven local system would encounter. Christophers (2009,pp.10-14) asserts that artificial scarcity must be created in order to control the availability and reproducibility of public goods. Consumption of public goods by one person does not affect the availability of consumption by another person. Once a public good is produced and put into the market, in theory, it can be consumed infinitely without affecting the scarcity of the resource. Television programmes are naturally public goods. Therefore, principles of scarcity and supply and demand do not naturally occur. Exploiting the potential value of these resources is difficult without market or regulatory intervention that creates scarcity. Copyright laws are the most recognisable forms of artificial scarcity (Christophers 2009,p.10-12). Garnham lays out four strategies to create artificial scarcity: control of distribution, selling the audience and their attention, hardware provision, and creation of content that requires constant re-consumption and are used to commoditise products and realise their potential value (1987, p.30). Garnham asserts that audience maximisation is the best way to achieve profit maximisation (1987, p.30). With high investment costs, television programmers often look to exploit the economies of scale and scope to attract new audiences. His research highlights one of the major economic concerns for local television that local programmers are not necessarily focused on expansion into new geographic markets. This raises questions about the perceived value, investment potential and profit strategies that are necessary for a local television station to be successful. However, scarcity driven marketing and economic planning does not address the main challenges for local broadcasters. The landscape of todays local market is marked by technological changes, consumer power and brand value. Managers must address these, plus many other challenges that go beyond the scope of traditional economics. Strategic management helps develop systems to manage and promote growth throughout the entire organisation. Business strategy provides the framework for managers to address the multifaceted issues, from economics to human capital, in a highly competitive marketplace.
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Sanchez-Tabernero and Carvajal provide a summarised overview of strategic activity, they say, strategy always involves establishing priorities, backing some objectives, at the expense of others (2002,p.1). They go on to argue that strategy is concerned with decisions about the direction and focus of an organisation, based on internal and external forces. Growth potential and resource availability are factors that drive strategic decisions. They explain some of the risks that come with strategic management. They claim that strategy is associated with growth activities; without proper management, strategic growth can cause a firm to lose focus on specialised services and may result in production inefficiencies (Sanchez-Tabernero and Carvajal 2002, pp.2-3). However, strategic growth can decrease disadvantages associated with smaller firms and strengthen a groups position through diversification tactics (2002, p.4). Traditional media has had to diversify and expand their products due to the influx of new media and a shift in market power from the producers to the consumers. Sanchez-Tabernero and Carvajal, help identify some of the qualities of strategic choices and is useful in developing generic strategic frameworks that can be applied to media organisations. Porters Five Forces that shape competitive strategy (Porter 2008) works well as a complement to Sanchez-Tabernero and Carvajals assessment of strategic activity. Porters seminal work on the forces that affect rivalry has been a mainstay in economic and strategic literature for the past decade. He identifies the five forces that determine the competitiveness of an industry. This is a useful strategic device in assessing market elasticity and potential of specific firms. Understanding external and global marketplace helps local media organisations define their roles and strategic position in the markets. This positioning can lead to specific tasks that will help them establish and maintain their place in local and regional markets. Porters work is useful within local markets as local economic conditions and levels of competition are different from national and global trends. Chan-Olmstead explores strategic management in detail. Her analysis covers the brief history of the subject and how strategy is applied in todays media economy. I found her strategy map- about the formulation and implementation of strategy- very helpful in outlining some of the main concerns within local television (Figure 2.1). Chan-Olmstead argues that strategy is not concerned with the creation of scarcity, but rather, with resource alignment within the firm (2006, p.164). Strategic management is mostly concerned with resource management and the alignment of resources between and across departments within an organisation. Barney (1991) and Das & Teng (2000) define resource alignment as accessing
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resources not currently available but necessary for a firm to maintain or establish competitive advantage. Chan-Olmstead argues that the benefits of resource alignment are motivational factors that drive firms to diversify their product, whether it be in geographic or product markets (2006, p.174). She goes on to say that, the dependency on local communication/media infrastructure may also lead to a strategy that is geographically related (Chan-Olmsted 2006, p.174). For our task, this resource alignment plays an important part in the strategic decisions of a local station.

1.2 The Local Market

Aldridges work, Understanding Local Media, has been an important resource for my research. She provides a broad overview of the different elements that make up local media in the UK. Her research into the local and regional press has been useful in helping develop frameworks for my research focus. She addresses some of the issues around academic research into local media. Aldridge asserts that academics in the UK are caught up in international flows and pressures to maintain recognition at a global level (2007, p.7-13). Research has reflected this drive towards global recognition. Part of this preoccupation with internationalism in academic research, may be a result of a non-borders lifestyle (2007, p.7). Academics tend to think and live globally and their research reflects this trend. However, as argued by Aldridge, most people live locally (2007, p.8). It is interesting that scholars have tended to boil down globalisation and the international flow of communications, and have developed measures for working in those markets. She covers many of the important issues around local media including culture, management, and economics. Her work is not all-encompassing but does provide significant information about local media. The academic work around localism highlights the complexity and dynamic nature of community spheres (Paranjape 2007, Kavoori 2007, Oberholzer-Gee and Waldfogel 2006). Aldridge pulls from the Future Foundation Report, which asserts that people create regions through their interactions with the people, places, and activities around them (Aldridge 2007, p.10). Therefore peoples interaction with media will be a dominant force in developing their perceptions of their community. Local media orients consumers to the activities of people within the same geographical spheres. At the local level, programmers depend on the community to drive content interests. (Paranjape 2007, p.462). This

orientation creates an attachment to the community and media organisation. Local broadcast strategy should consider the implications of these local interactions.

1.3 Defining Local

One of the tasks of this project is to define the parameters of locality. What is considered local, and how do we assess the local qualities of a large market versus those of a small market? Additionally, where are geographic lines drawn and how far does local television reach? The range of locality, from national to ultra-local, will have direct impact on economic capabilities of a broadcaster. How a broadcaster defines their operation and how trading partners view their organisation will have a significant impact on their ability to create and exploit product potential. However, technological advances in DBS and internet transmission has eliminated many of traditional spatial boundaries associated with terrestrial broadcasting (Albarran 2010, p.86). The economic impact of technology and exploitation of economies scale and scope has created pressure on smaller media firms to diversify their products and expand their reach (Christophers 2009, p.76). New definitions of localism are concerned with the cultural boundaries rather than spatial boundaries. Kavoori defines localism, as it relates to internationalism, as a set of standards that has evolved out of global trends (2007, p.295). In Kavooris opinion, local has been portrayed in contradictory ways either, as a residual category overtaken by development, as a haven of resistance against globalization, or as a historical or cultural context (2007, p.295). The conceptual breakdown of localism is shown by Kavoori, to create a gap between global perspectives and local knowledge (2007, p.297). The intricate and multi-layered dimensions of local are left out of the mainstream flows of communication at global levels, which is eventually reflected through local symbols in a community (2007, p.297). Global products are developed and packaged to meet expectations of a global audience. These products lack cultural symbols and definition that define regions and nations. Local flows of communication create and transmit local culture, which has become an important part of communities in maintaining cultural identity in a seemingly borderless world. Kavoori provides a contextual assessment of the assumptions about localism. Her work shows that an evaluation must draw upon the complexities within the area of analysis. However, her focus revolves around redefining the culture of localism and its application to globalisation. She is not concerned with spatial boundaries of localism. Dependency on Karvoois analysis alone may leave our definition of localism lacking the economic foundations and geographic
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specifications that separate the local television economy from the global industry. The cultural implications highlight the importance of local media systems. However, we must consider spatial and economic implications, as well as cultural assertions in order to develop appropriate strategies for local media firms. Paranjape goes further arguing that local television is defined in the meaning and dynamism created that sustains local culture (2007, p.460). Her work asserts local television is dependent on geographic scope and on the reflection of locality in which the local station is situated (2007, pp.459-463). Paranjape claims, in a globalised world increasingly dominated by ready-made images, people easily fall prey to the options produced by some propaganda machinery (2007, p.461). Local media is defined by its ability to communicate with and be a part of the community. Global media feeds people information and ideas about the world outside of their local spheres. Local television is a system that can reflect and respond to the fluctuations within the community. Differing from imported media, local television is able to actively adjust to the dynamic culture in the community (Paranjape 2007, p.462). Although Paranjape does not discuss economic implications of a dynamic culture, her work highlights the importance of local culture. There is a clear need for local media systems to sustain these cultures in an increasingly globalised world. Cultural implications are significant, and local media plays an important role in developing and maintaining local culture. Reviewing these issues led me to develop the ideas presented in this project. The resurgence of interest in local broadcasting in the UK calls for a fresh look at the industry; local media is lacking an assessment of firm-level actions. I have used the information in this literature review to develop a research paradigm to produce strategic models for a local broadcast system in the UK.

Chapter Two: Research Methods

This chapter is focused on identifying the methodologies used to define and identify management principles of local television in the UK. These methods have been used to plan, develop and carry out specific tasks designed to provide data and supporting information, which will contribute to the topic and field of study. I will justify my approach by explaining how these methods have been formulated to fit this project. Furthermore, I will address some of limitations of my research and some different variables on the outcome. Qualitative research is the main type of research used. The information available through government and industry reports and inquiries into other local media systems provides a wide range of issues and topics for us to build a case for local media in the UK. Some of the findings are based on data collected from local television station managers in the USA. I will explain how I collected this information and its application to the rest of the project. Data collection and processing can be a time consuming, confusing and frustrating element of any research project. Choosing how one should collect information is only the start of a process, which must be planned from the outset and modified as the project develops. Determining what questions to ask, how to ask them and how to pick out applicable information requires in-depth knowledge of the subject and a clear vision of project outcomes. The focus and argument presented in any work is based on the evidence and support found during this process. Therefore, one must spend a considerable amount of time developing a research strategy that will yield the most accurate results. Much of the theoretical framework presented in this project, comes from existing literature on media economics and strategic management. The task of identifying issues within the local media comes from government reports about the local media. These reports will help address the main concerns around local media in the UK. The framework theories help determine what approaches are applicable and acceptable for UK media. The best way to answer the questions of this project was to uncover the unique issues and themes within the UKs local broadcasting system. With a recent surge in interest, new reports and analysis have been published that assess the UKs broadcasting environment. This new information allowed me to define some of limitations of the system, but also, let me address the economic structure of the industry. These reports gave me a clear picture of the economic structure of the local broadcast system in the UK. The bulk of my work is concerned with identifying strategic techniques and devices that are applicable and necessary for the successful operation and sustainability of local television. The topic will be addressed
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using a three step process to: give an overview of relevant strategic literature, discuss strategy within broadcast system, and develop strategic positioning and action models for the local system in the UK. The issues with this type of research and data collection are concerned with the bias of the researcher. Although the research questions are clear, the researcher may fail to recognise shifts or alternative approaches presented within the data. This means that the data may move the discussion in a different direction, but the researcher may fail to recognise or accept the alternative discourse. This can create a theoretical gap and leave findings lacking proper support. It is imperative that the researcher compare information from the reports with the theoretical information and work hard to rule out any personal bias that may stall the discussion. One main issues around the local broadcast system in the UK is the lack of truly local television. It was difficult to find relevant material that contributed directly to strategic management from a UK perspective. In order to overcome this lack of evidence, I collected additional materials from three different nations to create a comparison to draw some conclusions. The challenge with presenting information from other systems comes from the regulatory structures and cultural trends that make each system unique. In order to address these limitations, I have carried out additional research to provide grounding and support for the data collected from the Shott report. I carried out telephone interviews, which were designed to reinforce the qualitative research and highlight practical management techniques of successful managers from stations in the US. I conducted a total of five interviews and have included materials from three of those interviews in this project. Two of the interviews were left out of the findings as the information was irrelevant to the discussion. I have selected two similar markets based on size and number of local stations within the market. Market size is determined by Nielsen market research and the stations in this report are ranked between 25 and 50 in the US system. There are between 700,000 and 1.3 million homes in each marketroughly 1 million to 2.5 million people (Nielsen 2010). These market numbers are similar to the market size of potential local stations in the UK, as presented in the Shott Report. I have set out to identify trends and themes and will present the results as a case study, which prioritises their importance in relation to the research topic. Many strategies and economic characteristics in the local broadcast system in the US can be applied to the local UK system. One of the respondents asked to be kept anonymous so the interviewees have been labelled as STM1,
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STM2 and STM3. Information concerning names and organisations for the other two interviewees can be found in the reference list. STM 1 operates in the Greensboro-High Point-Winston Salem market in the state of North Carolina. This station is located in the city of Winston Salem (population 230,000), but provides news coverage for the whole market. They compete with two other local stations, which offer similar news and advertising products and are located in Greensboro (population 270,000) and High Point (population 115,000) respectively. STM1 has been in television for 40 years, and has been the general manager of the Winston-Salem based station for nearly a decade. STM 2 manages a station in the Raleigh-Durham market, which covers an area reaching approximately 1.1 million homes in North Carolina. The station provides local and regional news coverage, as well as local and national spot advertising opportunitiesand competes with three other local television stations that offer similar services. STM 2 has been in management at other stations around the country for over a decade- and has been at this current post for two years. STM 3 also manages a station in the Raleigh-Durham television market. This manager is unique in that she has been at her post for eight years but brought little outside experience to job. Instead, she has spent the entirety of her television career at this one station. She has worked up into the position. The interviews and case studies present a unique challenge for this project. The main goal is to gain knowledge about strategies, techniques and methods used to manage internal resources and adapt to external forces around their organisation. Some of the issues- raised in the interviews- revolve around very specific management and economic concepts. Many of the interviewees did not use academic terminology or definitions to explain why and how different methods work. In order to overcome this, the questions were formatted- to the best of my knowledge- to reflect professional terminology and phrases that still maintain their academic application. Additionally, I have included case studies from Taiwan and Basque country, Spain. This information helped identify common trends amongst local broadcasters across national boundaries, as well as characteristics unique to each system. The Taiwanese case study looked at competitive strategies in a market driven satellite broadcast system. The case from the Basque country addressed the balance between market driven and public-service oriented local television. These two cases are different in their structure and approach to local strategies but provide a unique cross-dimensional mix of ideas, which have been applied to this project.
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However, there are a number of limitations with this comparative analysis. Legal and economic conditions around television are drastically different from country to country. These differences, if left unexplained, create a theoretical breakdown that fails to highlight the uniqueness of the different broadcast systems. In order to explain these differences, I have tried to take each system and draw out similarities and transferable elements respectively. The Shott Report was used to identify characteristics in the UK system. These characteristics were compared to material from the case studies. Elements that matched were used to develop the ideas presented in this project. This chapter outlined the methods used as the primary mode of data collection. Information obtained through reports will be applied to existing frameworks and processed to support the discussion. Supplemental support is provided through comparative data from interviews with local television station managers in the US and case studies from broadcast systems of Taiwan and Basque country. Some limitations include the differences in television systems and markets from country to country. However, the different systems give us a multi-dimensional assessment of the strategic actions at the local level. The results from these different cases provide the basis for this project. This methodology uncovers some key strategic management issues with local broadcasting in the UK.

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Chapter Three: An Overview of Strategy

This project is focused on providing information designed to further the discussion concerning commercially viable local television in the UK- specifically looking at the role of business strategy within this system and its application at the local level. There are a wide range of approaches proposed by management and strategy by scholars that can be utilised to fit the local broadcasting sector. The literature review covered some contributions to the field of strategic management. This chapter focuses on specific models, definitions and strategic tools applied and used in this study. I will focus on organisational function, structure, resources and core competencies; then explain their contribution to strategy development within an organisation. I highlight the strategic models and structures used to create a strategic assessment for this project. Information presented in this chapter will move the discussion towards specific strategic devices that can be applied to the broadcasting industry.

3.1 Defining Strategy

Before this discussion can move on to highlight the factors used for this project, there needs to be a definition of strategy as it applies to this research. Some scholars have proposed definitions of strategy that are broad in scope and provide generic solutions to common market driven problems (Porter 1999, Ansoff 1965). For example, the Ashridge mission model defines strategy simply as a firms competitive position and their distinctive competencies (Campbell and Yeung 1999, p.287). Distelzweig and Clark claim that strategy is a road map from a current position to a future position (2006 p.837). While these definitions paint a picture of what strategy does, they fail to deliver clear solutions that organisations can apply to specific organisational areas and problems. Another group of scholars have tailored their definitions of strategy to fit specific market segments (Sanchez-Tabernero and Carvajel 2002, Chan-Olmsted 2006, Mai 2002). For example, Chandler, an early strategy scholar, says that strategy is, the determination of basic long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for those goals (1962, p.13). Definitions, although useful, must be weighed against other factors and applied as part of a larger strategic framework. I have pulled characteristics from a different range of strategic theories in order to present a definition that encompasses aspects of the media industry tailored to fit locally managed firms.

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Strategy balances internal assets with the external environment to determine the long term planning and prioritisation of an organisations resources and duties and their application to the markets that firm serves.

3.2 Models for Strategic Planning

The implementation of strategic planning tools serves a variety of purposes in firms, including the clear definition of an organizations purpose and mission, and the establishment of a standard base from which progress can be measured and future actions can be planned (Mayo 2006, p.837). Porters seminal work on strategy and competition is often referenced and utilised to assess market variables and a firms strategic capabilities based on those factors. Porters Five Competitive Forces framework is particularly useful and can be used to plan strategy and assess a firms potential in an industry. This framework helps determine the intensity of competition within a market by evaluating the five factors that influence levels of competition. The five forces are: potential entrants, buyers, suppliers, and substitutes- which combine make up the fifth force of overall competition (Figure 3.1 models Porters Five Forces). This assessment can help firms: identify threats, map their position in the market, and assess overall competitiveness between firms (Mayo 2006, p.836). The model is useful because it is transferable across many different industries and firms of varying sizes. Another planning device that can be used in conjunction with Porters Five Forces is a SWOT analysis. The SWOT analysis is a generic planning tool that can be applied across a wide range of organisations and highlights a firms internal strengths and weaknesses, as well as their external opportunities and threats. Panagiotou says that organisations operate in an environment of uncertainty and complex market conditions, and understanding that environment is essential for strategic planning (2003, p.8). A good SWOT analysis considers implications of environmental factors and their impact on the organisation. Threats to a firm may not require any intervention, and strengths may be dependent on external forces, which an intervention may disrupt. An internal strength may lose its value and become a weakness if it is not evaluated and managed appropriately. The SWOT analysis aims to exploit external
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opportunities by utilising a firms internal strengths, and minimise the risk of threats and impact of weaknesses (Panagiotou 2003, p.8). The planning process is an important step for strategic development, as it provides a useful benchmark for strategic assessments in the future. Managers must select the appropriate tools to assess their current market position, benchmark their performance and develop appropriate strategic actions to meet long term goals. Planning tools like Porters Five Forces framework and the SWOT analysis allow organisations to chart their position and benchmark performance.

3.3 Organisational Structure

The function or purpose of an organisation is a major factor in determining the strategic direction managers develop and implement. An organisations purpose drives a managers decisions concerning resource allocation, distribution, market entry, customer care, financial resources and human capital. These elements and decisions naturally define an organisations structure and culture. When developing a strategy, managers must understand the functions and culture that govern the organisation. Strategies that change or alter this structure can affect the balance and natural grouping of a firm. Models have been developed to help firms assess culture and structure without disrupting them. I will use the Organizational Functions model, as presented by Lewis and Lawton, to assess the functions of an organisation and how these functions depend on the industry in which a firm operates. Moreover, organisational culture affects the structure and strategic actions of a firm. Managers should be aware of the underlying cultural assumptions that will affect a firms strategy. Scheins Model of Organizational Culture highlights the importance of cultural elements and their impact on organisational strategy. There are four generic functions, presented by Lewis and Lawton, which an organisation must carry out to be successful: performing goal oriented tasks, management of their environment, keeping people working together and establishing ways to deal with outsiders (1996, p.223). These functions must be performed in tandem, and in order to succeed, an organisation must meet a minimum standard of quality for each category. However, the tasks, resources and standards applied to each category depend on the type of organisation. Lewis and Lawton developed the Organizational Functions model to classify

firms based on their activities and where they may fall in relation to each category (See Figure 3.2). Their model highlights different elements that firms can focus on, depending on
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the markets and customers they serve. Managers can use this analysis to create a profile of their firm and identify basic goals and tasks, which are necessary for survival in an industry. This analysis is a useful tool in the strategic positioning process. Additionally, there is a strong relationship between the structure and culture of an organisation. Schein asserts that culture is made up of underlying assumptions that relate to an organisations functions; these assumptions drive strategic activity (found in KungShankelman 2000,p.15). Kung-Shankelman says, culture, therefore, plays and important role in determining firstly how environmental developments are perceived by members of an organisation, and secondly how members of the organisation react to the strategies designed to respond to those environmental developments (2000, p.16). Figure 3.3 is Scheins model designed and tested to understand culture and how it relates to strategy.

3.4 Resources
Resources are a crucial element of a firms structure. Resources form the product and service lines of a firm. They are the main source of value for an organisation. Managers are tasked with controlling and distributing these resources within and across different segments of the organisation (Porter 1999, p.88). Broadly speaking, resources can be put into one of two categories: tangible or intangible resources. Tangible resources are the observable and quantifiable assets of a firm; they are physical assets like property and equipment (Hitt, Ireland, Hoskisson 2007, p.79). Intangible resources are unique, knowledge based assets of each organisation and are difficult to monetise; brand value and inimitable skills are examples of intangible resources (Landers and Chan-Olmsted 2004, pp.6,10). Physical and knowledge based resources are complementary forces that require cross-directional management and co-ordination. Strategic planning requires firms to choose which types of assets they will build competitive advantages around. In a highly competitive industry, with many substitutes, competitive advantage develops when specialisation in a product or service emerges (Porter 1980, p.50-51). These advantages can be developed into long-term core competencies.

3.5 Core Competencies

Development of strategy can be a long process. Managers need to forecast growth potential, risks and environmental factors that may not exist now- but may drive the industry in the future. They must also identify, enhance and co-ordinate unique elements and activities within their organisation that create their competitive advantage. Prahalad and
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Hamel have termed these sources of competitive advantage core competencies (1999, p.221). Core competencies focus on inter-organisational relationships between individuals, groups and equipment used to carry out tasks. Work flow processes, application of technology and resource management build a set of skills that can be turned into competitive advantages through unique products and services. Developing and growing core competencies requires careful synchronisation of communication and a commitment to team work across administrative boundaries (Prahalad and Hamel 1999, p.221). Hitt, Ireland, and Hoskisson claim that core competencies are one of a firms most important sources of competitive advantage and should drive strategy formulation (2007, p.77). Strategies are developed to drive performance and growth over a long period of time. Current skills or products may be obsolete in the future. Failure to develop sustainable core competencies will result in strategic mismanagement and a loss in market position (Prahalad and Hamel 1999, p.225). Therefore, not all capabilities or competitive advantages can be turned into core competencies. As a result, strategists and managers need to separate current capabilities to identify and develop a firms core competencies that will drive them into the future. Prahalad and Hamel provide an assessment for how these competencies can be identified. They show that multi-market access, benefits for the end user and difficulty to imitate are elements of capabilities that can be developed into core competencies (1999, pp.224-230). Managers should build competencies based on these characteristics. Sustainability is another important factor when considering strategic action- and core competencies must be developed as sustainable, long term strategic devices. Hitt, Ireland, and Hoskisson have identified four characteristics of sustainable competencies. They show that value, rarity, costs to imitate and non-substitutability contribute to the profile of successful and sustainable core competencies (2007, pp.85-87). Cannon makes a case for management development and training as a core competency (1996, p.277-279). He argues that highly competitive, business driven markets are crowded with similar property based assets and brands. Competencies based on physical resources will leave a firm lacking clear competitive advantages. Markets driven by technology are highly volatile and physical resources are easy to imitate and therefore not sustainable. Instead, firms should commit to hiring and training managers of excellence (Cannon 1996, p.281). Competitive advantage comes from quality of work, commitment to a firm and experience these management groups have attained (Cannon 1996, pp.280-287). This focus on intangible resources and human capabilities highlights an important element in
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strategy formulation and firms should consider how they manage and promote the intangible assets of their organisation. Core competencies must be developed and managed carefully in order to promote growth. These tools of competitive advantage are built from a firms internal resources. As we have seen, these resources are based either on tangible properties or intangible assets. Strategic direction is dependent on the development of these competencies. Managers must choose to focus development either on intangible resources or tangible ones. The direction chosen is dependent on market structure and the functions of the organisation. Core competencies are not short-term solutions to resource based problems. Rather, they are strategic devices that drive the future potential of a firm.

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Chapter Four: Strategy and Broadcasting

In chapter three, I analysed some important features and models of strategy planning and formulation. The material presented is important for this project. Chapter four narrows this strategy research to focus on the broadcasting industry. This chapter will draw from existing studies and literature to highlight the characteristics of strategic management in broadcasting. This information will lead the discussion to our main section of analysis concerning strategic management at the local level in the UK. Most research about media economics looks at the normative elements of the industry as a whole (Albarran 2006, Becker et al. 2009, Picard 1989). This research has shown the importance of media economics as a field of study- but has been limited to cumulative analysis of networks and trends across hundreds of firms. However, the firms and organisations, which comprise the industry, differ in size, structure and purpose. These differences can limit the focus of research. This writer does not contend that previous research has been insufficient or lacking, but rather, a need exists to explore media economics within specific segments of the market. Strategic media management addresses external and internal influences of an organisations strategic actions (Picard 2004, pp.1-4). Strategic management allows us to apply economic characteristics, unique to the media, to individual or clustered firms to assess how these firms operate. In turn, results yield information that can be used to further the field of study and create formulas useful for similar firms. Media scholars have started to look at firm-level operations and have addressed some strategic principles across similar firms. (Chan-Olmstead 2006, DeMars 2010, Dimmick 2003, Picard 2004, Slocum and Albarran 2006). This section will address some unique characteristics of the media industry, as well as strategic literature that can be applied to the broadcasting industry. Many elements are crucial for strategic management, and managers should be able to identify and understand them in order to develop appropriate strategy. The economic topics below have been sufficiently covered by other media scholars and do not need to be rehearsed in this project. Therefore, I will dedicate time to connecting economic elements to the strategic elements discussed in the previous section.

4.1 Developing Strategy

Strategy is concerned with the long term planning and allocation of important resources that create sustainable competitive advantages. Strategic management addresses
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the process and alignment of a media organisation to its environment (Chan-Olmstead 2006, p.161). The previous section highlighted the importance of structure, resources and development of core competencies. This section addresses some characteristics of media firms and products- and how they can be utilised to develop strategic positions. I will examine the consumers role and changes in market structure- then address how resources affect strategy. Finally, I will talk about strategic tactics that firms employee.

4.2 The New Media Market: Consumer Control

Media firms have diversified their products and expanded their potential reach through technological expansion. This shift has given producers the ability to share and promote their products across multiple platforms and markets (Majoribank 2003,p.59). Lotz says, a confluence of multiple industrial, technological, and cultural shifts conspired to alter institutional norms in a manner that fundamentally redefined the medium and business of television (2007,p.20). However, these shifts have also reshaped the way media is consumed. Users have access to unlimited amounts of information from just about any location. Additionally, switching from one device to another, or one channel to another, has relatively low if any switching costs. Consumers can multi-task their media usage and are less connected to traditional forms of communication (Vahlberg 2010,pp.2,9-10). Walker and Bellamy show this change in power. The first generation of television users were known as viewers and simply received the message from the producers; the new generation are known as users, as they are no longer just receivers of information- but participants in influencing content (2010,p.41). These changes have ushered in a shift in power from the producers and owners of media content to the end user or consumer of content. As a result of these changes, firms have had to re-tool and re-focus how they brand, market and distribute their products. Traditional advertising supported media are losing market share and must develop alternative revenue streams to supplement losses in their primary funding models. Ferguson claims that media supported entirely by advertising will not thrive because audiences are more empowered than ever; they are able to avoid advertising and spend less time with one outlet (Ferguson 2010,p.61, Picard, 2004). On the other hand, users who access content across multiple platforms are more active in their consumption. Pitts and Zeng claim that this shift creates new opportunities for advertising and niche-casting (2010,p.23). Additionally, strategies have been redeveloped to support nonlinear, cross-platform expansion (Lotz 2007,p.20).
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Strategic direction of a firm is highly dependent on the users and consumers they target. Unfortunately, it is difficult to predict consumer behaviour. Managers must adopt a level of flexibility so as to not get caught off guard by changes in consumer preference- yet must be careful not to over commit to high risk investments. Chan-Olmsted says, as technology shifts more control and power to consumers, media strategies and competitive dynamics should be evaluated based on consumer, rather than industry, factors or definitions (2006,p.174). Managing this volatile environment requires careful consideration of consumer interests, and managers need to adopt models that measure and evaluate shifts in consumer preferences. IBM published a report addressing shifts in consumer behaviour and the future of advertising. The report claims that the future of the advertising market will be shaped by: consumer attention, creativity, specific measurement tool and revamped advertising inventories (Berman 2007,p.2-5). Marketing trends will need to shift with consumers as they move into new platforms. According to Pitts and Zeng, producers and managers should be trained to recognise and adapt to changing usage patterns- and consumer expectations (2010,p.23). Further complicating the development of appropriate strategy is the valuation of different platforms and products presented to consumers. Investment into state of the art mobile technology may create an attractive selling point, but if demand from advertisers or consumers fails to meet operational investment, then risks and costs outweigh the benefits of an added service. Chan-Olmsted has proposed a media product taxonomy chart to determine risks and involvement that products and services require from consumers (Figure 4.1). This chart classifies consumer involvement and risks- dependent on their time and financial investment into media products. Data collected from this type of assessment can be useful for SWOT analysis in the strategic planning stages. Implementation of this type of consumer usage chart simplifies consumer activity and gives firms the ability to design plans that reduce risks.

4.3 Resources and Diversification

Resources that make up a media organisation are the tools that drive product development and are the main sources of value for an organisation. In the previous chapter, I talked about differences between physical and knowledge based resources- and the need for cross directional management and coordination. This section addresses some unique characteristics of media products and presents Lander and Chan-Olmsteds Related Product Diversification strategy.
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Media firms have often been described as offering products that have multiple functions (Albarran 2010,p.66, Doyle 2002, Picard 1989). Picard has termed this unique characteristic as the dual product nature of the media (Picard 1989). Media products function in two distinct markets; the content market where the product is presented to consumers, and the advertising market where the product is sold to advertisers- looking to sale their product to the consumer. The dual nature of media products plays a significant role in the development of strategic elements in a media firm. While media firms are able to draw revenue from products that operate in dual markets, technology and digitisation has driven the industry towards multi-platform consumption patterns (Albarran 2010,p.72-74). Consumers seek products that are easily accessible through different devices and on different platforms. Coupled with the explosion in television channels, broadcasters are faced with extreme competition from new and old media outlets. Moreover, market boundaries are becoming increasingly insignificant as consumers are able to substitute and switch media products. However, media products- which are public goods- can lead a firm to develop diversification tactics in order to exploit economies of scope and scale. (Chatterjee and Wernerfelt 1991). Technology provides traditional media outlets with the ability to repackage and deliver products in new ways. A study carried out by Landers and Chan-Olmsted set out to determine which resources became more vital to a firms competitive advantage as markets changed over time. The study found that property and knowledge based resources contribute to different production capabilities and effect strategy in different ways. Knowledge based resources, like human capabilities and multi-purposing, became important as markets became more volatile, while property based resources affected the performance of an organisation (Landers and Chan-Olmsted 2004,p.21). While the results are applicable to all media firms, the study highlights the importance of resource management in media firms. Effectively coordinating and managing tangible and intangible resources can lead to the development of core competencies. Managers should build strategies that emphasise and exploit those core competencies (Hitt, Ireland, and Hoskisson 2007,p.385). Niche marketing has become a normative feature of media firms in the UK (Datamonitor 2009). Specialised programming and products are designed to find particular groups and exploit demographic gaps in the market. Niche-casting or narrowcasting is a way to reach these groups and deliver unique products. The audience should; therefore, drive the type of advertising that firms seek (Napoli 2003,p.25). In order to be successful, firms must
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clearly define who their audience is, or who their audience will be, in order to develop objectives that will help them meet their needs as an organisation (Pringle and Starr 2006,p.14). Niche marketing drives product development and advertising trends. Managers need to clearly establish what groups they will target; much of this is dependent on organisational structure and purpose. Corporate strategy seeks to exploit resources across different firms by promoting firm- level strategy tailored for that firms market segment. According to Dimmick, some media conglomerates have implemented the niche-breadth strategy to exploit firm and market specific resources to diversify their products- and build niche segments in multiple markets (2003,pp.68,75). One example he gives of the niche-breadth strategy is a corporation that owns multiple daily newspapers. The strategy of a local-suburban based daily will differ from the strategy of a large metro-daily, yet corporate strategy should exploit these differences by facilitating firm-level strategy through supplemental resource allocation (Dimmick 2003,pp.73-75). Although the niche-breadth strategy is designed to exploit capabilities within media conglomerates at the corporate level, the principles can be applied to individual organisations. Dimmick suggests that strategy should build on the aggregate potential of the different groups and firms unique capabilities. He delineates four characteristics of the niche-breadth strategy: scale as defined by revenues, diversification, economies of scope, and multi-national operation (2003,p.70). I have omitted scale and multi-national operation from this discussion as they are not applicable to this study. Diversification spreads risks and increases potential access to new platforms and markets. Economies of scope can help firms diversify. Conglomerates can easily diversify; however, smaller firms must work harder to diversify. Scope economies occur when production of one product lowers the cost of another because costs are spread across those products (Picard 1989,p.63). Additionally, Landers and Chan-Olmstead have suggested a firm-level strategy of related product diversification that may be useful for firms to extend products into other markets and across formats (2004,p.173). This type of diversification exploits economies of scope. Media firms can extend the life of their products and introduce them to new audiences. Similar to the niche-breadth strategy, related product diversification seeks to exploit capabilities and available resources across different departments and platforms. Moreover, related product diversification may be useful for local firms to develop appropriate diversification techniques.

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This chapter has addressed some unique economic characteristics of the broadcast industry and assessed how those elements affect strategy. As aforementioned, we have seen that a shift in market power, technological capabilities and resource allocation has reformed the media industry. Firms must develop strategies that account for these changes. The next chapter will address how firms can develop strategic processes, at the local level, to deal with these changes.

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Chapter Five: Strategy in Local Television in the UK

With the information presented in previous chapters, it brings us to the final section addressing needs of local broadcasting firms in the UK. This section presents strategic methods that local broadcasters could implement in their operations. The Shott Report has been used to assess needs of local broadcasters in the UK. Additionally, case study materials have been included from interviews conducted with local station managers from the US, as well as strategic profiles from local television companies in Spain and Taiwan. Data collected has been used to create a model for strategic positioning and a model for creating firm-level strategy.

5.1 Need for Local

Technology has led to an explosion in the media industry. There are more channels, platforms and content available than ever. Consumers are given countless options, as a result their usage patterns have drastically changed. Globalisation and conglomerates rule the media space. Local and regional media market space is dominated by products from the media production centres of the world (Sanchez-Tabernero 2006,pp.463,468). Television has evolved as much as any traditional medium; it has been redeveloped to meet the needs of fragmented audiences (Lotz 2007,pp.4-6). The competitive landscape, which was once clearly defined, is blurred and confusing. Not only do old mediums compete with one another, now they compete with new mediums. Audiences are spread across hundreds of channels- and across multiple outlets. Some have argued that the current media landscape is too crowded and competitive to support new local media systems (Smith and Hendricks 2010). Bailey believes that investment costs will be too high and returns to low to support a local system in the UK (Marketing 2010,p.13). Robertson argues, on the other hand, that globalisation and the internationalising process contribute to the development of local markets (1994). Additionally, as Esser explains, popularity of local content and programmes increased in the mid-1990s even as an international television industry emerged (2007,p.163). This writer suggests that globalisation, deregulation and conglomerates create the need for progressive local media systems. These local systems provide an important outlet for cultural definition and expression lost on a global audience. Television can meet these local needs as it plays an important role in our understanding of the world around us.

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Ashuri says, television offers the resources that human beings need both for positioning themselves and for understanding and respecting others. It is therefore not just a form of media but a format through which a society articulates and maintains its differences in relation to other cultures while at the same time searches for some forms of commonality (106).

Although this study is not focused on expounding on the need for local media, it is important to establish the basis for this project. This chapter presents applicable strategic positions for local television firms in the UK based on information gathered from the Shott report and data collected from case studies.

5.2 The Shott Report

A recent report was published addressing the viability of commercially run local television in the UK. Commonly known as the Shott Report, this review explains how local television could be possible, as well as addressing some issues a local system will face. I have used the report to highlight key components of local broadcasting in the UK. These components will be used to develop strategic positions for local broadcasting firms. The following section will discuss: brand identity, sustainability, content, revenue streams, promotion and competition -as presented by the Shott report. The report expresses the need for local stations to develop a strong brand and longterm sustainable business model (p.2). With the help of the Steering Group, the report lays out the conditions they deem necessary for local stations to accomplish their goals. Local news and information is considered the best option for local content and production. Content tailored to the specific locale will provide an additional source of news, which is difficult to replicate by regional and national news services (p.3). Audience research has shown that there is a desire to have more localised news offerings (BBC Trust 2011). Furthermore, the report suggests that local stations should seek to produce a minimum of two hours of local content per day (pp.9,37). For a local station to be successful, it must be able to sell its audience to advertisers. So, it is imperative that local stations work hard to build consistent viewership. In order to build a consistent audience, the report suggests some promotional activities that local stations can use to engage with potential viewers. Cross-promotion on other channels, prominent positioning on the electronic programme guide and an automatic re-directing system --a
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system that would send viewers directly to their local newscast with the option to switch back to regional or national coverage --are ways to promote and build a repertoire with viewers (pp.3-4,24). These methods will generate interest and drive viewers to the new service. Napoli refers to audience measurement as the coin of exchange or currency of media products (2003,pp.19-21). These measurements create value that can be turned into revenues through advertising. However, there is no system in the UK designed to measure local television audiences. One of the major limitations of local broadcasting has to do with the lack of audience measurement devices (Shott Report 2010,p.4). The inability to deliver consistent viewer statistics means that local firms must develop alternative currencies in order to evaluate their products and sell advertising (Shott Report 2010,p.29). Additionally, the report emphasises the importance of alternative revenue sources- claiming that local advertising alone would be insufficient to meet the long term goals of a station (pp.4,37). Local stations could generate additional income by providing news services for national and regional news firms. News gathering would be primarily for the local station, but if local news had regional or national significance, other broadcasters could pick up the stories. Furthermore, the report discusses some operational tasks that will build a local stations position in the market. The proposed local broadcast system would be supported by a national network that provides supporting services, access to national advertising and network content (p.6). Jankowski and Fuchs discuss the importance of networks for local broadcasters. They say, the distinctive aspect of a network is its ability to integrate local and national services into a continuous, balanced flow (1995,p.62). The report stresses the need for owners to develop relationships with other local media groups and build upon the capabilities within their particular market rather than subsist on national content (p.6,33-34). The size of the organisation is an important factor in strategic choices. Economic fluctuations affect firms differently, depending on their size and external capital (Picard and Rimmer 1999,p.6). Therefore, managers must carefully consider their level of dependence on the national network, and they should strive to build local connections with other media firms and local businesses. The report identifies some of the major hurdles and obstacles local stations will face. For this project, I will discuss issues that can be addressed from a strategic stand pointmainly concerned with competitive forces governing the market and affecting local firms. Local broadcasters will be competing for viewers and advertisers. Competition for viewers exists between the broadcaster and other television channels available to the consumer.
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Additionally, viewers have the ability to supplement and substitute their television viewing with other forms of media. Furthermore, competing for local advertisers is where local stations will experience some of the slimmest margins and toughest competition. The report delineates some of the challenges local broadcasters will have in attracting local advertising. Established media groups-- newspapers, radio, outdoor advertising, direct mail and internet search engines -- will control much of the local advertising space. Most local businesses do not have big advertising budgets and will find it difficult to switch or increase their advertising spend with local television (Shott Report 2010,p.24). Local broadcasters must develop attractive products, promotional schemes and creative selling points that highlight the distinctive nature of their products to attract viewers and local advertisers. The Shott report presents information it deems necessary for the successful branding and long-term sustainability of local broadcasting firms in the UK. Content and programming should be tailored to the local market. This will separate local broadcasters from regional and national news providers. Content should be promoted using crosspromotional schemes to generate interest and establish a presence in the market. Additionally, local firms should develop multiple revenue streams to reduce dependency on local advertising revenue. Management should work to expand local networks and limit their reliance on the national network. Lastly, stations must find ways to deal with the competition within their locale. Station promotion should highlight the unique nature of their products. The following section will contribute additional data to the discussion by examining management principals and strategic positions of local stations in other parts of the world. The information will contribute to the strategic principles for local broadcasting in the UK.

5.3 Case Studies

5.3.1 Local Television in the US
I have gathered additional information from station managers in two mid-sized US markets. The US has a strong tradition of local, commercial broadcasting, while the UK has thrived on a national, public-service oriented system. Although the UK system and the US system vary greatly, there are some shared characteristics. Most local stations in the US operate with a sense of duty and mission to their viewers. In 1999, Hurricane Floyd left a trail of destruction through much of Eastern North Carolina. Flooding and power outages left many people stranded for days and some were displaced for years. During the initial aftermath and weeks following, local television stations stayed on the air continually. They
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provided crucial information to people and provided an outlet for them to connect with the proper authorities to assist them. Many of the stations lost revenue and spent a great deal of money to provide around the clock coverage. This coverage and commitment to publicservice was seen six years later when Hurricane Katrina devastated most of the Louisiana coast, and many have referred to the local news coverage of Katrina as admirable and necessary for the people and nation (Rogers 2006 and Powers 2005). Similarly, the 7/7 bombings in London, were covered by the BBC, ITV and other news organisations with the same fervour and response (Lorenzo-Dus and Bryan 2011 and Douglas 2006). On-going news coverage, beyond the scope of regular coverage, highlighted the importance of publicservice responsibility and provided a crucial service to families and people affected by the attacks. These similarities show that the two systems share a common commitment to public interest. Strategic positions of local firms in the US will provide additional insight into the direction and focus that managers in the UK should consider. Four elements were persistent throughout the interviews: brand value, human resources, research and development, and multi-platform management. I will discuss these elements and the strategic components, management styles, and organisational tasks these managers identified as important components in a competitive and volatile media market. The broadcast market has become extremely unpredictable and highly competitive. Technology moves faster than firms are able to keep their equipment up to date and employees trained on the latest innovations (Slocum and Albarran 2006,p.147). Additionally, power has shifted from producers to the consumers. As a result, traditional media organisations have been forced to extend their operations across platforms and cut expenses for seemingly marginal gains (DeMars 2010,p.259). Transferable brand value is one way that managers have created long term value for their organisations. The brand, as defined by one station manager, is the value and image a consumer associates with a product, the first thing that pops into their head (STM1). He went on to say that branding builds trust and can relay a sense of community service. Additionally, the brand should be based on principles and values, not on a platform. The brand must extend beyond television. Therefore, the brand must be adaptable to the consumers choice. Brand value is an intangible or knowledge based resource, and according to Landers and Chan-Olmsted, less affected than tangible resources by market fluctuations (2004,pp.6-7). Intangible resources tend to be stable

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investments in competitive markets; developing these resources, such as your brand value, is a necessity in todays media market (STM1). Another intangible element, which is an important feature for local stations, is human capital. Station managers talked about the importance of employee development, training and management. When asked about the value of employees, one manager said they were the most valuable tools he has (STM2). The people in an organisation shape its culture. The culture of a firm is more important than the right equipment. Culture can foster growth or stunt it; it affects the way people work together and how they think about the future (STM2). Another manager said that his role is to, make sure everyone who reports to me is successfulIf we are successful, we reach all of our goals (STM3). He went to say that a lack of success from one person can hamstring the entire organisation. One of the biggest challenges managers face is investment into technology and innovation. One station manager says that investment in innovation is necessary to maintain competitive advantage, but notes that determining the level of investment is extremely difficult (STM3). Innovation encompasses investment into technology and research and development to optimise resources. One manager notes that operational excellence is the cost of entry and massive investments are required to find out what works (STM 1). Operational excellence is a strategic concept that simply means performing operational tasks well (Haddock, Mizuno and Ngai 2006,p.3). As a result, stations have to spend money on technology to find out what will work. Managers invest in developing services and products that are higher quality than their competitors. Broadcasters must continually invest in technological upgrades and invest in future growth. However, these investments should not lower the investment or value of current products (STM 1). In other words, investment in current products should not be lowered in order to spur growth of new products, especially if the new products produce marginal gains. STM 2 says, from a technology stand point, were looking at ways to get out in frontI still have to do a better news cast, I need to do that because that is just the cost of entry. If we dont have a decent news cast than forget it, but while were doing that, were looking at things that are going to be important to us in two or three yearstechnology gives the opportunity for stations to grow if they can strategically figure it out and then they can move forward. I have talked briefly about the shift in television from mass audience to niche and specialised groups. Lotz says, although television can still function as a mass medium, in most cases it does so by aggregating a collection of niche audiences (2007,p.28). The
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station managers I spoke with echoed this shift. They identified their organisations as a multiplatform media firms, and their job titles reflected this shift- as they were listed as multiplatform managers rather than broadcast station managers. One manager addressed this change and referred back to the value of the brand versus the platform (STM1). Part of this shift is actually an inter-organisational proposition. Although digital services make up a small percentage of revenue, you have to find a strategic balance that fosters growth in that sector (STM3). You have to invest in and recruit people that understand the multi-media aspects of the business without abandoning core revenue streams. The consumer will choose the next technology or the next platform; we have to be flexible enough to meet the consumer where they are instead of expecting them to come to us (STM1). Information collected from the station managers showed a clear commitment to development of intangible resources. Human capital and brand value are essential in a volatile media environment. Managers can build core competencies and strategic positions based on their commitment to their people and value of their brand. Additionally, maintaining competitive advantage requires continual investment into technological capabilities.

5.3.2 Taiwan Satellite Companies

Mai analysed the satellite channel system in Taiwan. Her findings revealed that company size, operational type and ownership structure influenced strategies that firms develop (2002,p.145). The study applied Porters three generic strategiescost leadership, differentiation and focus-- to the Taiwanese satellite system. Mai found that Porters strategies were too broad and did not fit the Taiwanese system, yet the basic concepts were still transferable to build a new set of strategies for Taiwanese satellite companies. Company size was found to effect strategies of satellite companies the most. Smaller firms adapted lower risk strategies and focused resources on specific segments of the market, while larger firms differentiated their products and spread their resources (Mai 2002,p.161). Concentrated or focus strategies, seen in smaller firms, are characterised by efficiency and competitive advantage- developed through the narrowcasting techniques (Mai 2002,p.150). These strategies are a direct result of the competitive nature of the satellite industry in Taiwan. There are multiple satellite service providers ranging in size from small, single channel broadcasters, to large conglomerates that control most of the media space. The industry profile is similar to that of UK broadcast system in terms of company size and
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number of operators in the industry. The results of Mais study highlights the importance of firm-level strategy tailored to each station. The size of the firm greatly affected the scope and capabilities of that firm. Smaller firms developed strategies that capitalised on their unique market positions by focusing on the potential value of a single-product.

5.3.3 Local Television in Basque country, Spain

Another study analysed the role of local television in the promotion of the Basque culture and language. Arana, Azpillaga and Narbaiza. discuss the current system of local television in the Basque region of Spain. The system was first developed as a public service to promote the culture. Local television was a way to reinforce the identity and language of the Basque people. However, a lack of regulation has muddled the system and threatened its existence (Arana, Azpillaga, and Narbaiza 2004,pp.89-90). The local system suffers from a lack of organisational structure and proper planning. Arana, Azpillaga, and Narbaiza suggest ways to revitalise the system and turn it into an important device for cultural expression in the region (2004,p.91). They say, the objective of local stations should not be to compete with more general channels in regards to geographic coverage and content, but rather to serve as a complement in their search for information and for subject matter of local, cultural, social, and historical relevance (Arana, Azpillaga, and Narbaiza 2004,p.89). New models should be developed to spur future growth and match the objectives of the society and country (2004,p.92). The case from Basque Country is a good example of how a lack of strategy and poor management can threaten local media systems. Local media services provide a useful cultural outlet, but they require appropriate management that understand the cultural elements- and are able to develop strategies that exploit these unique characteristics. Arana, Azpillaga and Narbaiza offer constructive strategies for local stations to operate as commercial broadcasters, but maintain their role as agents of public-service (2004,pp.108). Local culture should shape the way local content is produced and transmitted. Strategies should exploit these unique local elements when developing core competencies and competitive advantage. The Taiwanese case study shows some strategies that have been developed based on the size of the firm in a highly competitive commercial market. Local television structure in the Basque region stressed the importance of building a culturally relevant product with less focus on commercial interests. The local system in the UK will have elements from both of
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these systems. Commercial viability with supplementary support from public interest and government regulation means that the local stations will need to adapt strategies that address the needs of commercialisation and culture. The Taiwanese study shows how a small commercial operation can compete with other media firms, while the Basque study highlights the cultural significance of local television.

5.4 Strategies for Local Broadcasters

The Shott report laid out some of the normative elements that may lead to a sustainable local television system in the UK. The case studies explored some common themes of local broadcasters in the US, as well as commercial elements from the satellite system in Taiwan and public service system in the Basque country, Spain. This section introduces strategic methods that can turn these elements into strategic positions and actions. Stations should understand their position in the local market. Picard and Rimmer found that national trends do not necessarily reflect local trends, and local media managers need to measure local economic trends apart from national (1999,pp.4-5). Strategic positioning identifies internal and external forces and assesses the impact they will have on strategy (Johnson, Scholes, and Whittington 2009,p.14). As mentioned in chapter three, Porters Five Forces model as well as a SWOT analysis are ways to assess where a firm stands in comparison to their competitors in the market. While these models are useful and should be considered- capturing all of the intricacies of the local market is difficult. A more in-depth model designed specifically for the local broadcasting system in the UK would paint a clearer picture of where a broadcast station is positioned. Resources, competition, organisational structure and the national network are four factors that contribute to the strategic positioning of a local broadcast station. These factors make up the forces that contribute to the development of core competencies, competitive advantage and achievable long term goals. Positioning models eliminate unnecessary factors and keep firms focused on their capabilities. I model the effects of internal and external factors on the development of a strategic position for local stations in the UK (Figure 5.1). This strategic positioning model charts important forces from the different internal and external factors that will directly affect the strategic capabilities available to a firm. The model has been developed based on information gathered from the Shott report, the case studies and the strategic models presented in previous chapters.

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I have identified four categories for firms to analyse and identify their strategic position. The first two categories- resources and organisational structure- are concerned with the internal forces of that organisation. Management style, organisational culture and business models make up an organisations structure. Resources are the intangible and tangible sources of production and value creation. Non-scientific evidence from the case studies suggests brand value, content and human capital are primary intangible resources of competitive advantage for local broadcast organisations. Organisational structure and other resources should be developed to support the growth of these primary competitive advantages. External factors can be categorised into two groups: competition and the national network. The level of local competition must be assessed in order to determine how accessible the local advertising market will be. The national network will also play an important role in the strategic position of a firm. A firms dependence on the national network, or lack thereof, will strongly influence programming decisions, resource allocation and local market penetration. Once a strategic position has been established, a firm can develop a strategy and implement an actionable timeline. Developing a strategy requires three steps: development of core competencies, establishing a competitive advantage and setting achievable long term goals. Once these steps have been taken, firms can create an implementation and assessment timeline. This timeline sets short term objectives and periodic assessments, while maintaining focus on the long term goals of the firm. Figure 5.2 models these steps. Short term objectives should address immediate or situational issues; these outcomes can vary in outcome and material (Slocum and Albarran 2006,p.152). Long term issues such as shifts in technology and changing demographics can be addressed as part of the long term strategic aim. Landers and Chan-Olmsted say, managers also may revise strategy decisions in accordance with the uncertainties they face and in response to the information gained from environmental scanning and resource evaluations (2004,p.8). Recognising and planning around external market fluctuations will keep a local firm flexible and able to adjust their actions without abandoning their long term objectives. The composition of a firms strategic position, along with their competencies, competitive advantage and long term goals form the bases of a local broadcasters strategy.

34

Conclusion
My aim has been to provide information that contributes to the academic field of business strategy and local media systems, as well as provide information that professionals can utilise in the day-to-day operations of their organisations. This project has suggested potential strategic decisions for future managers of local television stations to consider. The models have been developed based on information gathered from previous studies on business strategy, the Shott Report and case studies from other local broadcast systems. Shifts in market and consumer power demonstrate the need for appropriate strategies that exploit a firms advantages and minimise their weaknesses- in a world where marginal gains and losses can result in success or failure. Resources and organisational structure should be evaluated to establish the internal networks that contribute to organisational culture. Additionally, managers should consider the implications of local and national competition, as well as their dependence on a national network. External factors will greatly affect the strategic capabilities and position of a firm. Strategies for local television should be concerned with developing core competencies, competitive advantage and long-term goalsbased on intangible assets that are less prone to market instability. A limitation of this project has been the non-existence of the local system for which the models have been designed. The information is based on an ideal system that has yet to be established. There may be a significant number of changes made to the structure of the proposed system between the publication of this project and the creation of a local system. Future research into this type of business strategy could address the topic from a cultural stand point and evaluate the role that local culture plays in local television systems. Additionally, local systems in the nations of the UK may require a modified strategic approach. Research could compare audience expectations in the nations to that of the UK as a whole.

35

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Appendix 1
Figure 2.1
Chan-Olmsteds Strategy Map of factors that affect formulation and implementation. (2006, p. 176)

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Appendix 2
Figure 3.1
Porters Five Forces Framework (2008, p. 80)

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Figure 3.2
Lewis and Lawtons Organisational Functions Model (1996, p.222)

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Figure 3.3
Schein Model for understanding culture, strategy and environmental context (found in Kng-Shankleman 2000, p. 20)

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Appendix 3
Figure 4.1
Chan-Olmsteds Media Product Taxonomy (2006, p.175)

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Appendix 4
Figure 5.1 Determining Strategic Position

Resources
Intangible: HR, Content, Programming, Brand Value, market knowledge Tangible: Facilities, Equipment

Competition
Local market forces, other local media firms. (Porters Five Forces)

Strategic Position

Organisational Structure
Management styles Culture: mission, purpose, community involvement Business Model

National Network
Level of dependency: funding, content, structure Regulatory structure

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Figure 5.2 Firm-Level Strategy

Strategic Position

Develop Core Competencies

Establish Competitive Advantage

Set Achievable Long Term Goals

Actionable timeline for implementing and assessing strategic decisions

Firm-Level Strategy
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