Yahoo Case Study

Introduction
Yahoo was once a leading internet company. The company offered various services such
as e-mail services, finance, social media, video sharing services, and sports. The company’s
financial valuation stood at 125 billion dollars in 2000. However, Yahoo had lost 85 percent of
its market value by the time Marissa Mayer was being appointed. The company’s market cap
stood at 19 billion dollars. The company’s troubles could be seen by the high rate of CEO
turnover, with Marissa being the seventh CEO in less than five years. By the time Marissa was
taking over, the employees had low levels of motivation. The workplace culture was not ideal for
optimal productivity. The culture had become overly bureaucratic, and this had made Yahoo lose
its zeal and characteristic as a high-tech company. Unlike in the past, where the company was
characterized by causal work culture, Yahoo had implemented a stacked ranking system. The
ranking system created disharmony in the workforce and negatively affected teamwork. The
company was facing stiff competition from companies such as Google. In 2013, the company
was hacked, and this resulted in further loss of clients. Marissa should have taken on a customer-
centric approach that would have helped the company compete favorably with its rivals.
Background
Yahoo’s dismal performance can be attributed to a number of factors. One of the key
factors revolves around communication. The company faced stiff competition from companies
such as Google and Facebook. While Yahoo was initially a market leader in the Web 1.0 portal
world, competition from Google and Facebook resulted in the company falling to third place
before the appointment of Marissa. The company was thus unable to effectively adapt to the high

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levels of competition. The company failed to take on a customer-centred approach. In the early
days, the company had concentrated on enhancing the user experience. Yahoo had provided a
web portal that offered solutions to users who found using the internet difficult. The company
had introduced various innovative products such as Yahoo Mail, Yahoo Sports, and Yahoo
Finance. The many users who were using its services made the company attractive to investors.
However, the shift from Web 1.0 to Web 2.0 created a problem, and Yahoo was unable to adapt.
Google and Facebook had concentrated on user experience and had thus taken on a dominant
position in the advertising business.
Another major problem that compounded the problems at Yahoo was poor management.
The management had failed to rise up to the task and create a conducive work environment and a
vibrant workforce. Employees had low levels of motivation and morale, and this affected their
productivity negatively. The bureaucratic culture at Yahoo was not ideal for a high-tech
company. It discouraged innovation and, in so doing, made the company worse off. Many
employees worked from home, and this in itself was a problem. There were low levels of
collaboration, and employees did not embrace teamwork. Mayer did not improve the situation,
and she implemented certain changes that were not popular. She implemented a stacked ranking
system that created problems relating to teamwork. A hostile workplace environment was
created by the stacked ranking system.
Alternatives
When Marissa joined Yahoo, she attempted to make certain changes aimed at turning the
company around. She was keen on rejuvenating the employees and boosting their morale. She
also restructured the company’s mission which was “people then products then traffic then
revenue”. She shared this mantra using various channels, including Twitter. She broke the

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bureaucratic culture and engaged employees in open and direct communication. She organized
FYI town hall meetings and encouraged employees to ask questions. She removed the option of
employees to work remotely with the aim of fostering collaboration. She implemented a stacked
ranking system where team leaders were tasked with the duty of ranking employees. One of the
consequences of this action is that high performers refused to work with one another. She
invested in mobile advertising, social media, video, and native advertising. She also sold part of
Yahoo to Alibaba. Proceeds from the sale were used to pay for social networking site Tumblr
and video company Brightroll.
Marissa’s strategies failed to address the core problems facing Yahoo. One of the
alternatives was to restructure the organization and, in so doing creating a functional
organizational structure. Management of employees requires one to ensure that employees are
productive while eliminating hostilities that may exist in the workplace. In adopting a functional
organizational structure, the relationship between employees in the same department would have
improved substantially. A functional organizational structure stimulates innovation and
encourages healthy competition between employees drawn from various departments.
(Rothaermel, 2021) As a high-tech company, Yahoo relied on innovation. As a result, Marissa
made a mistake by increasing workplace hostilities that would effectively stifle innovation at
Yahoo. She needed to come up with a better way of handling the problem. A functional
organizational structure would have encouraged employees to specialize and would have created
self-determined teams (van der Kolk et al., 2019). The structure would have also resulted in
operational clarity. However, there are a number of disadvantages associated with this approach,
including the lack of a common organizational purpose. With each team in an organization

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being self-sufficient, there may lack of a common purpose in the organization. Regular
interactions between different employees may be limited in a functional organization structure.
Another alternative was to create a customer-centric strategy. Yahoo was facing stiff
competition from Google and Facebook. It needed to respond by coming up with a strategy that
would ensure that it gains a competitive advantage over its rivals. One of the main strategic plans
that it would implement was the adoption of customer-centricity (Rothaermel, 2021). In the
technology industry, customer experience is the key to competitive advantage. Customers choose
their products based on the interaction they have with various brands. A customer’s journey
begins with visiting a website coupled with reviews they receive about a product. To this end,
Yahoo should have enhanced customer experience with the shift to Web 2.0. Every employee in
the organization should have concentrated on making the customer experience better. Marissa
should have been concerned about how Yahoo could become more customer-centric (Lamberti,
2013). The company should have invested heavily in securing its systems. The hacking incident
resulted in data leaks that further discouraged customers from subscribing to the company’s
services. Securing the data should have been a priority as opposed to investing the money
obtained from the sale of a section of Yahoo to other ventures such as Tumblr and video
company Brightroll.
There are many advantages associated with a customer-centric strategy. One of the main
benefits is that Yahoo would have enjoyed a better competitive advantage over its rivals, such as
Google and Facebook (Shah et al., 2006). The company would have improved its customer
retention, and this would have translated to increased profits. In addition, the company would
have attracted new customers. A customer-centric strategy results in referrals. When a company
offers goods and services that fulfil the needs of the consumers, they are likely to refer their

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friends and family members to the business. One of the major disadvantages of a customer-
centric strategy relates to the ever-changing needs of customers. A customer-centric strategy can
drain a company’s resources (Lamberti, 2013). It is difficult to keep up with the needs of
customers. More resources may need to be invested in fulfilling the needs of customers.
The third alternative was rewarding the best employees and, in so doing, promoting
healthy competition. Giving employee incentives is one of the ways through which Yahoo would
have achieved employee motivation (Rothaermel, 2021). The introduction of things like the
employee of the year would have gone a long way into raising the morale of the workplace. All
employees would aim to ensure that they work hard and, in so doing helping the company to
achieve success. One of the main disadvantages associated with this is that it may create
resentment. Employees who repeatedly fail to qualify for the recognition and rewards may
become disinterested. Some employees may give up, and this makes the strategy to be less
feasible.
Proposed Solution
The proposed solution is the implementation of a customer-centric strategy. Yahoo had
lost its market share as well as market value due to competition from other companies such as
Google and Facebook. The two were able to come up capture consumers with the sift from Web
1.0 to Web 2.0. In web 1.0, the company had excelled due to the user-friendly services that it
provided. Yahoo’s web portal satisfied the needs of consumers, and this resulted in high profits
from advertising. The company failed to implement a similar strategy in Web 2.0. It allowed
companies such as Google to capture consumers, and its problems were compounded by a hack.
The company needs to ensure that it creates products that are easy to use and have an interface
that is user-friendly. In so doing, the company is likely to achieve success. It is likely to attract

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more consumers and regain its leadership position. The strategy is also sustainable in the long
term, and the payoffs are high.
Recommendation
Marissa should have realized that two problems the company was facing relate to low
levels of motivation in the workforce coupled with stiff competition. To this end, the company
should have started by ensuring that it eliminates disharmony in the workplace. Any tensions that
may have existed should have been eliminated. The next step would have been to invest in
market research. Research would have helped clarify the needs of consumers. It would also have
highlighted the strengths of the company’s competitors. Research would also have highlighted
market changes and changes in consumer preferences. The next step would have been to create
goals and execute measures towards achieving the goals.
Conclusion
Yahoo highlights a case of the problems relating to strategic planning and management of
companies. While she had the right intentions to turn around Yahoo’s fortunes, she failed to
properly strategize. She failed to recognize the problems that the company was facing and, in so
doing, implemented measures that did not address the company’s problems. Companies should
use Yahoo as a case study to foster better decision making with the dynamic nature of most
markets and industries.

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References

Lamberti, L. (2013). Customer centricity: the construct and the operational antecedents. Journal
of Strategic marketing, 21(7), 588-612.
Rothaermel, F. (2021). Strategic management. New York: McGraw-Hill.
Shah, D., Rust, R. T., Parasuraman, A., Staelin, R., & Day, G. S. (2006). The path to customer
centricity. Journal of service research, 9(2), 113-124.
van der Kolk, B., van Veen-Dirks, P. M., & ter Bogt, H. J. (2019). The impact of management
control on employee motivation and performance in the public sector. European
Accounting Review, 28(5), 901-928.