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Unformatted text preview: Teaching Note: Case 33 – Reader’s Digest Case Objectives 1. To investigate the strategic role of an organizational mission. 2. To examine how external and internal forces affect competitive strategy. 3. To investigate choice of competitive strategy in a changing industry environment. See the table below to determine where to use this case: Chapter Use Key Concepts Additional Reading and/or Exercises 1: Strategy Concept Leadership for strategic management; sustainable competitive advantage; vision, mission, strategic objectives NOTE additional reading, web links and embedded video 2: External Environment Industry competition five forces; general environmental factors NOTE industry info, web links and embedded video 3: Internal Analysis Value-chain analysis; resource-based view of the firm; VRIN 5: Business Level Strategy Competitive strategy; generic strategies NOTE additional reading web articles; Case Update Case Synopsis The Reader’s Digest Association (RDA) was a mature brand, and its problems may have been related to the aging of its target demographic, its changes in corporate leadership, its return to private equity funding during a period of extreme economic uncertainty, and an industry undergoing major changes as readers migrated to become Internet viewers. Even though RDA’s flagship Reader’s Digest magazine had the reputation of being a “hinterlands magazine read by kindly grandparents”, the magazine was still the number- one consumer magazine in the U.S., with additional subscribers in 70 other countries. However, its circulation numbers were falling compared to those of its top competitors. RDA had tried several times to revitalize and rejuvenate itself. It’s portfolio of magazines had broadened to include not only lifestyle, gardening, and cooking, but, in 2009, to include pastor Rick Warren’s Purpose Driven Connection , a magazine plus DVD and companion guide for small Evangelical groups. Former CEO Thomas O. Ryder had initiated many diversification efforts, including acquisitions, and international ventures. Current CEO Mary Berner was installed in 2007 after a private equity firm bought RDA, returning it to private status after a 17-year run as a public company. Berner restructured the company, divested some of Ryder’s acquisitions, and attempted a re-branding via a new mission statement, a redesign of the flagship magazine, continued global expansion, and a multi-channel distribution strategy that included a strong Internet push. However, RDA’s 2007-09 financial instability was more apparent in the face of reduced consumer spending and a drop in magazine advertising worldwide. The unfortunate timing of the private equity leveraged buyout might have finally created the ultimate risk factor. In its 2008 Annual Report, RDA noted that there might not be enough cash flow to fulfill current debt obligations, and therefore the almost 90-year-old firm could face bankruptcy of liquidation. Could RDA survive?...
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This note was uploaded on 10/11/2011 for the course BUSINESS A 474 taught by Professor Thompson during the Spring '11 term at Ill. Chicago.
- Spring '11