Economics Assignment Report on CNN: Market Structure, Competitive Strategies and Economic Power

This report analyzes the market structure, competitive strategies and economic power of CNN, a leading news and information delivery company. It covers topics such as Porters 5 Forces Model, non-price competition, CNN profitability, and more.

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Economics Assignment
Report
7/20/2018
Student Name

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Contents
Introduction................................................................................................................................1
Structure, conduct, and performance of the firm.......................................................................1
Porters 5 Forces Model...........................................................................................................2
Nonprice Competition................................................................................................................4
Market Structure.........................................................................................................................5
CNN profitability.......................................................................................................................6
Economic Power........................................................................................................................8
Competitive strategies................................................................................................................9
Porter’s Generic Strategies.....................................................................................................9
VRIO.................................................................................................................................11
Conclusion................................................................................................................................13
References................................................................................................................................14

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Introduction
CNN (Cable News Network) considered among the world’s largest leader in online
news and information delivery. The company is a private and independent company and
registered under the law. The company is available 24hours and seven days a week. CNN
headquartered are located in Atlanta, Georgia and in bureaus worldwide. The company has
globally a staff of 4000 news professional who is reporting the latest news to the company.
CNN.com features the latest media technologies from live video streaming to audio packages
to searchable archives of news features and background information. This site is available
throughout the day to provide the updated news. CNN was the first news television channel
in the United States (CNN, 2016).
The top competitors of CNN Company found to be the New York Times, Fox News,
News Corp, Vox Media. The company earned the highest revenues of $3.2 billion and it
found highest among all its competitors (Owler, 2018). Currently, the company has acquired
the Beme. Inc. is a mobile application platform that allows the users to share the short video
or clips with an amount of $25M in 2016 (CNN Press Room, 2016). The company is playing
in the oligopoly market in which few sellers are available in the market which make the entry
of new entrants difficult by applying barriers in the form of investment.
Structure, conduct, and performance of the firm
The global environment in which the business operates affects the structure of the
company. There are many internal and external forces, which makes the operations of the
business difficult. The company is surviving in the monopolistic market, where there are
large numbers of buyers and sellers are present and providing the close substitutes to their
clients. The entire news channels are providing almost the same news, which is happening in

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the environment, so the company have to face large competition from the market. The
company’s conduct and performance will also depend on its rivalry function. Then also, the
company is recording the highest profits among all its competitors due to its uniqueness and
premium services given to their clients (University of Cambridge, 2016).
CNN International Accounts for 20% of the revenues globally. Around half of the
revenues in CNN come from fee from cable and satellite distributors (Atlantic, 2018). The
CNN success lies when the business gets globalization as almost 265 million households
across more than 200 countries are watching and preferring the CNN and this is the reason to
get the high revenues for the company. The CEO of Time Warner, CNN’s parent company
shared that the company has $600 million shareholders in its international success (TV
Newser, 2017).
Porters 5 Forces Model
Internal Rivalry
CNN assess the market through the competition whether the company is competing in price
or non-price competition. The price rivalry in the case of CNN is finding intense among the
competitors, as there are many sellers present in the market. All the news channels are selling
the same or homogeneous services in the market and consumer can easily switch to other
rivals due to less switching cost (CNN, 2016).
Substitutes and complements
In the market for providing the news, there are many substitutes available in the market.
Some industries are related or some are unrelated to the specific stream. For example, some
companies provide the news about the business details whereas some channels are giving the

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details related to the world, politics etc. in this price elasticity is finding to be high in the
industry demand. This will drive away the consumer (CNN Money, 2018a).
Bargaining power of Supplier
The suppliers look more powerful and can extract the high amount of profits from the market.
The supplier is powerful due to the concentration in the market. The customers fixed in their
criterion to choose the specified investment. The suppliers of CNN are not confined or related
to the input. They focused on the output and focus on producing the substance competitively
(CNN Money, 2018b).
Bargaining power of buyers
The buyers also have the same power as suppliers. The buyers have the capability to erode
the profits from the by negotiating the prices from the competitive market. The buyers show
their power by demanding the specific design in service receiving or the specific news from
the channel and company. In this type of market, both the supplier and the buyer have the
same features to dominate the market and company too (Nagle & Müller, 2017).
Entry barriers
In this type of market, profits attract the entry, which erodes profits. This will steals the
incumbent from the market and increases the internal rivalry in the market. The entry in this
market is affected by the consumer attitudes towards the co many and its brand. The brand
loyalty of the customer judged. CNN uses the concept of the economies of scale in the
business to get the advantage of the low cost. As CNN is a reputed brand in the market and
has the large customer base, which will make its existence more strong in the market
(Markusen, 2017).

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Nonprice Competition
CNN is facing the non-price competition in which the company is focused on giving
the quality services to its clients. Non-price competition is a marketing used by the company
in which they try to distinguish its services from competitors based on the attributes like
design and uniqueness. The difference made by the CNN is that they are providing the
extensive service to its customers; focus on the customer needs and requirements or any
sustainable competitive advantage other than the price. This strategy used by CNN to have
large span in market. Initially, company has faced the low sales but gradually when the
market span increases the sales and revenues both get increased (Jena, & Sarmah, 2014).
While competing in the non-price competition, CNN is doing the advertising, selling
staff, locations convenience, sales promotions, special gifts, and other services. The main
source of revenue in CNN comes from the two sources, which includes advertising and
subscriber/ licensing fee. According to the analysis, total revenues across Fox News, CNN,
and MSNBC projected to increase by 19.5% in 2016, to a total of nearly $5 billion. This
figure-estimated to get an increase in the near future and focus on getting the 25% growth by
2020. CNN is continuously upgrading its services and earning the higher revenues every
year. The demand for these services does not shift even if their prices increases as the
customers found brand loyal, they will not switch to other competitors. This is the reason that
CNN is enjoying the non-price competition in the market and it will be for the long period
(TV Newser, 2018).
Market Structure
CNN got publicity in the market by covering the news related to the gulf war and other
crisis in the year 1990. Before the arrival of CNN, events reported in two cycles only that is
for morning and evening newspaper and newscasts. However, CNN improved in it by
providing the services 24*7 to update about the events. The company is the first to enter in

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this market and enjoys the monopoly until 1996. In 1996, CNN received its first major
competitors with the launch of MSNBC. Then also, CNN remained at its first position. The
company is playing alone in the market. In the initial years, CNN put their prices low in the
market to have the customer ns try to provide the services at a reasonable cost. At that time,
the market found to confined and rigid in which customer does not want to switch to other
companies. CNN keeps its prices low to keep the potential entrants away to remain the single
provider in the market (Anenberg, & Kung, 2014).
In the initial years, CNN enjoys the monopoly in the market but after the arrival of
MSNBC, the monopoly ends. The market now the company is dealing in oligopoly market
where there are few sellers in the market. These sellers have the power to restrict firms or a
new company to enter in the market. The profitability of the firms should maintain in the
oligopoly structure. The decision in the oligopoly depends on the rivals as the demand curve
is indeterminate in which demand cannot be forecasted accurately by the firm. All the
decision will depend on the rivals (Gallego & Wang, 2014).
CNN profitability
The competitors present in the market try to erode the profitability of the CMN but
fails to do so due to the brand loyalty between the CNN customer and CNN differentiated
services. This will make CNN different from its competitors. Service provided by the CNN
has the capability to erode the profits from the market. For this CNN use the marketing
strategy and research methodology to analyze the need and requirements of the consumer that
which event to cover so that the maximum TRP can be earned by the channel (Piercy, 2014).
The revenue earned by CNN in 2016 is $29,318 million, which is more than the revenues
2015 that is $28,118 million.

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The CNN Company provides the various services, which include CNN mobile
services and E-Mail Newsletter. CNN mobile services offered the news on the mobile phone
using the app. From this, the viewer can read up to the minute news stories with color photos,
watch live, streaming video or the latest video on demand clips and receive the CNN
breaking news text alerts. Events happening in the global environment, all covered by the
CNN. Another service that found unique in CNN was getting the updates on mails. Receiving
the news alerts, latest news on politics, technology, health or the topics that consumer interest
the most. Another additional service provided by the CNN is of the lawyer locator,
technology products reviews etc. all this activity done by the CNN will increase the profits of
the company (Time Warner, 2016).
Economic Power
CNN has 36 editorial operations around the world and reaches around 91 million
households in the U.S and 373 million households globally. It considered being as the
number one online news destination, routinely registering nearly 2000 million unique visitors
globally each month. The branding of networks and services done by the company is more
than 2 billion people in more than 200 countries and territories. From all this information, it
can analyzed that the company has the potential to have the command and power in the
market, which make the company charge any price from its customer. As CNN is the first
company in this industry, the prices are first them only, so CNN prices work as the
benchmark for other company in deciding the prices. Competitors of CNN set their prices
according to the price charged by the CNN as if they charge high price no one will accept
their service in the market and vice versa (The Atlantic, 2012).
However, in the near future, the market share of the CNN goes on declining due to the rise in
competitors and its strategies. CNN uses the competitive strategy in the market while offering

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the offers and discounts. The company is offering the discounts rates on fiber and satellite
services. Its sponsorship deals and advertising brings the good revenues. The company has
maintained a competitive pricing policy for this channel and has fixed the rates based on
prices of its competitors. Its competitors are following the same service with additional
offers to attract the customer most. The reviews for CNN have come in the wrong direction
from Donald Trump and he said that the CNN provides the fake News and are not authentic
in nature. This news in the market decreases the image of the company in the eyes of its
viewers (Independent, 2017).
(Source: Statista, 2018)
Competitive strategies
Porter’s Generic Strategies

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Cost Leadership
The company like CNN are enjoying the cost advantage in the market due to the existence
from the initial years of this industry. This advantage makes the production of services in the
market at very low cost, which will ultimately beneficial for the buyer and seller. This
advantage will only be enjoyed only by the two or three firms in the broadcasting the news as
they have the large customer base in the market. CNN finds the sources from which they can
exploit the entire possible situation as if there is happening done in the market CNN is the
first to telecast it in the market, which makes them, have the advantage in the market
(Alipranti, Milliou & Petrakis, 2014).
Differentiation
In this strategy, CNN is markedly different from other news channel based on the uniqueness
and how fast the latest updates given by the company to its viewers. All the up and downs in
the market are first highlighted by the CNN in the new channel. This will make them
differentiate from the others and its buyers or viewers valued this. For providing this service,
CNN also charges the premium prices from their customers (Dai, Liu, & Serfes, 2014).
.
(Source: University of Cambridge, 2016)

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Focus Strategy
This strategy focuses on the two aspects, which includes the cost aspect and differentiation
focus. The CNN is focusing on both the strategy in which they are providing the unique
services to their clients by charging the high price for their premium services. The company
is providing the services art large so they get the benefit of low cost and uses the economies
of scale. Cost focus exploits the differences in the cost behavior in some segments of the
market while differentiation focus exploits the special needs of the viewers in certain
segments (Anselmsson, Vestman Bondesson & Johansson, 2014).
VRIO
Valuable
The service provided by CNN is finding to be valuable by their buyers as they are ready to
pay the high prices to get the channel in their television. The value of the CNN channel can
identify by frequently updating their viewers the happening in their surroundings
(Independent, 2017). For the convenience of their clients
Rareness
The company in their starting years, found with the rareness as they are first to provide this
information in the market about a recent event happening in the market and globally. The
resources provide by the company are rare as they are the only provider of news in the
market. The resources of CNN is valuable but not that much rare, the company is facing the
issue of competitive conformity. That means the company is not bad in facing the
competition.
Imitability

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CNN is having the temporary competitive advantage in the market. From the graph, it can be
analyzed that CNN is losing the market due to its rising competitors. This temporary
advantage may become an unused competitive advantage in future if the company does not
any strong step in maintaining its competitiveness (Boland, 2014).
Organization
The CNN considered arranging in its resources but if the organization is not giving any rare
or uniqueness in its services then its resources not utilized in the way, it should do. This will
make the competitiveness of the firm removed or vanished from the market (Elmes & Barry,
2017).
Conclusion
From the above discussion, it can conclude that CNN is the first company to start the
business of telecasting the news and events, which are happening in the environment. CNN
has enjoyed the monopoly in the market, as it was the only company in the year 1990. After
1996, its competitors MSNBC came in the market and start capturing the market. After the
arrival of competitors in the market, CNN has lost the share in the market. CNN is using the,
marketing strategy to attract and retain the customer. The customers of CNN are finding to be
brand loyal and do not easily switch to other channels. The revenues are also showing the
increasing trends from the past year, which will be a sign of profitability, erode by CNN.
Nevertheless, the company nowadays faces the threat in the market from its competitors that
are taking the profitability from CNN. With the arrival of new entrants in the network
business, the threats will faced by the CNN. CNN is trying to control this by using strategies
and competitive policies in the market. Previously company enjoys the power to make the
price of the services and is the price maker but after the arrival of the competitors, CNN has
the somewhat control over the price. To remain competitive in the global market, various

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strategies used by CNN. These strategies include the analysis of generic forces to know the
internal and external forces operated in the environment. This will analyse the potential of
CNN to operate in the market.

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References
Alipranti, M., Milliou, C., & Petrakis, E. (2014). Price vs. quantity competition in a
vertically related market. Economics Letters, 124(1), 122-126.
Anenberg, E., & Kung, E. (2014). Estimates of the size and source of price declines due
to nearby foreclosures. American Economic Review, 104(8), 2527-51.
Anselmsson, J., Vestman Bondesson, N., & Johansson, U. (2014). Brand image and
customers' willingness to pay a price premium for food brands. Journal of Product &
Brand Management, 23(2), 90-102.
Boland, L. A. (2014). Methodology for a New Microeconomics (Routledge Revivals): The
Critical Foundations. Oxon: Routledge.
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Gallego, G., & Wang, R. (2014). Multiproduct price optimization and competition under
the nested logit model with product-differentiated price sensitivities. Operations
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Independent. (2017). Trump's attacks on CNN helped their revenues far more than his
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The Atlantic. (2012). Awful Ratings, Record Profits: What's CNN's Secret?. Retrieved
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