New Recipe
From the publication of her first book on entertaining back in 1982 to what is now the media empire called Martha Stewart Living Omnimedia (MSLO), Martha Stewart has capitalized on what she does best—helping people create a lifestyle in which the ultimate in cooking, decorating, entertaining, and other homemaking arts are emphasized and celebrated. What exactly does MSLO do? The company has two primary strategic goals: to provide original "how-to" content and information to as many consumers as possible and to turn customers into "doers" by offering them the information and products they need for do-it-yourself projects. The business is built around core subject areas including cooking, entertaining, weddings, crafts, gardening, home, holidays, babies and children, and keeping and preserving (clothes, mementos, decorative artifacts, etc.). From these different subject areas, content is developed for different media including magazines, books, network television, cable television, newspapers and radio, and digital. In addition, the core subject areas have evolved into merchandise lines (sheets, towels, table linens, paints, etc.) at Kmart, The Home Depot, and Macy's. Martha Stewart herself personified the Martha Stewart brand. It appeared that the company had positioned its resources and capabilities well to exploit sociocultural and demographic trends. However, when Stewart was convicted in March 2004 of obstructing justice and making false statements related to the timing of a sale of ImClone stock and sentenced to a fivemonth prison term, her namesake company braced for some serious challenges in maintaining its competitive advantage. And they did endure some serious challenges. While Stewart served out her sentence, her namesake TV show was put on hold and company executives tried to "carefully de-emphasize the 'Martha-ness' of its products." The company was not profitable from 2002 through 2006, but had a small profit of $10 million in 2007. Since that time revenues have continued to decline with no net profits. Despite all this, Stewart was not about to let go of the company that so personified her. She no longer serves as CEO or chairperson of the company (her title is chief editorial, media, and content officer), but Stewart's personal imprint is still strong. Today, MSLO is organized into three business segments: publishing (magazines, books, and digital properties), broadcasting {MatTha Stewart Show), and merchandising. In 2010, the publishing segment accounted for 63 percent of revenues. The flagship magazine, Martha Stewart Living, is the "significant generator of content for our asset library." Other publications include Everyday Food, Martha Stewart Weddings, and Whole Living, and numerous books on subjects ranging from housekeeping to baking to weddings. Digital properties include marthastewart.com, marthastewartweddings.com, wholeliving.com, and partial ownership of WeddingWire, pingg, and Ziplist. In addition, the company developed two digital apps. One was a digital magazine specifically designed for the Apple iPad and the other was a Cookie app for the iPad. The broadcasting division accounted for 18 percent of revenue in 2010 and includes company activities related to television programming, distribution of that programming domestically and internationally, and satellite radio. The cornerstone of this division is The Martha Stewart Show, a daily how-to series that's filmed in front of a studio audience. However, the company was dealt a blow when The Hallmark Channel announced in early 2012 that it was canceling the program because the costs of producing were not offset by the small audience of about 200,000 viewers. The Martha Stewart Living radio channel is still on Sirius XM radio. The merchandising division accounted for 19 percent of revenue in 2010 and is responsible for selling Martha Stewartbranded products at "multiple price points through several distribution channels." Important retail partnerships include the Martha Stewart Collection at Macy's, Martha Stewart Living at The Home Depot, Sandals® Weddings by Martha Stewart, Martha Stewart Everyday at Kmart, and Martha Stewart Flowers with 1-800-Flowers. In December 2011, Martha Stewart Living Omnimedia sold a 16.6 percent stake in the company (for $38.5 million) to J.C. Penney Co. Starting in 2013, consumers will be able to shop at a ministore in J.C. Penney stores that will be stocked with Martha Stewart products and will have trained employees who will provide advice and tips. However, Macy's sued MSLO to block this new agreement saying that it violated Macy's own exclusive arrangement with the Martha Stewart brand. The outcome of the suit is still pending.
1. How could MSLO's strategic decision makers use value chain analysis in assessing the company's strengths and weaknesses? How about an internal audit? How about a capabilities assessment profile?