Corporate Governance

In many markets around the globe codes of governance are created for businesses to follow.  Although some of these codes are followed voluntarily, others must be followed in order to be in accordance with the law.  In The United States, the most widespread governance platform is the Sarbanes-Oxley Act of 2002.  In response to corporate scandals, The Sarbanes-Oxley Act of 2002 was signed into law in order to be able to ensure that firms are operating in an ethical and lawful manner.  All companies are required to file periodic reports with the Securities and Exchange Commission.  In response to this governance, Directv announced that they will be using the Approva Corporation to enhance visibility into internal activities. Firms that do not adhere to these controls receive severe penalties that have a dramatic effect on the profitability of the company and make the company appear to be corrupt in the public eye.  The last thing any business wants is their customers thinking that they operate using unethical practices.

Strategic Change

As firms evolve it is inevitable that they will go through some type strategic change.  Companies need to allow for this type of change in order to be able to meet changing demands, economic slowdowns, and technology innovation.  The strategic change process involves changing management, analyzing the situation, implementing an emergency action plan, stabilization, and returning to normal.  The first step and in my opinion the most important on is changing management.  If a firm fails to realize that a change in management is necessary, the firm is taking a risk on the firm continuing to do poorly.  At Directv the most crucial and most important change in management came when Mike White was named CEO in 2010 after leaving his chief executive officer position at Pepsi Co.  In two years Mr. White has been able to steer Directv into new ventures while keeping the company profitable for its shareholders.

Organizational structure at Directv

In order to reach goals, a firm must have an organized structure in place which allows for easy movements through system processes and provides management the knowledge of the activities of the different divisions within the firm.  In 2001, Directv completely revamped its organizational structure in order to become more flexible and focused in its daily operations while being able to pursue new ventures and reach new goals more rapidly.  The form of organizational structure that best fits Directv is the multidivisional structure.  A multidivisional structure is a form of organization where divisions are organized around product or geographic markets and are often self sufficient in terms of functional expertise.

Often firms will make remarks about how well they treat their employees even though upper management may never even meet people working in entry level positions.  When Mike White became CEO of Directv he wanted to connect with his employees at all levels of the business and find out how they actually felt about working for the satellite giant.  His avenue for accomplishing this was a television show called "Undercover Boss".  For the program, Mr. White would go undercover as an unemployed salesman in an entry level position in order to better understand the culture of the firm and to get a first hand look at how their employees thought they were being treated.  During his stint undercover Mr. White was able to get a better understanding of certain aspects within the business and how his employees deal with certain issues.  Mr White was even able to correct a few inventory and supply problems along the way.   

Acquisitions and divestiture

In addition to mergers and acquisitions, divestiture can be another strategic tool that management can use to increase shareholder's value.  In 2008, Directv gained $160 million by shedding its Puerto Rican operations. This decision was able to help offset some of the losses that shareholders had experienced that year.

A question comes to mind...Should Directv and Dish merge??  According to the FCC in 2002 a merger between the two companies would hurt consumers.  The deal was shot down by The Department of Justice but experts agree that this time around may be a different story.  A problem that I see in this merger is the cost that associated with it for both companies.  The key to these types of deals is that they are done quickly due to both the cost and the time value of money.  I feel that both companies will have to spend large amounts of time and money in litigation trying to get the deal approved by the government.  On the flip side a merger could make the digital cable broadcaster more profitable than they could be in the near future.    

Creating strategic alliances...

Companies create strategic alliances with other firms for a variety of reasons but most importantly to gain a mutual competitive advantage over their respective competitors.  Earlier this year in March Directv created an alliance with Invision to launch a sales system that will manage Directv's advertising sales for both linear and addressable television.  The program "Dealmaker", will improve the effectiveness and efficiency of Directv's sales operations.    When Directv acquired a rival Primestar in 1999 they were able to add almost 2.1 million subscribers as well as 11 high powered satellites.  Managers at Directv believed that this acquisition would enable them to be more competitive with their biggest rival, cable.  In the same quarter Directv also acquired US Satellite Broadcasting which was a premium multiple channel movie service.    

More recently, Directv's CEO Mike White is flirting with the idea of Acquiring Dish once again although he is sure that the deal will get shot down again.  Mr. White is also considering the idea of acquiring Netflix as well as Hulu which is a website where users can watch previously recorded television shows.  Not only would the Netflix and Hulu deals provide   stronger diversification, it would also provide shareholders piece of mind since Directv has seen its profits start to marginalize.  It seems that the only thing holding Mr. White back is The Department of Justice.  Directv must be on the right path to more successful ventures in the future because Warren Buffet's company, Berkshire Hathaway, bought over 4 million shares in 2011.  This is significant because Buffet has typically steered clear of tech stocks...  

Directv's international strategy is focused on becoming a major service provider in Latin and South America. Directv realizes that these markets have huge potential. Directv has taken the first steps to integrate DVR's Latin and South America.  We all know that Directv has had incredible success with their NFL Sunday Ticket package in the United States and we know that Directv has built a reputation for providing customers with crystal clear digital high-definition signals.  Now Directv will try to incorporate both of these services into Latin and South America.  It is no secret that most of the world watches soccer religiously.  It is by far the world's most popular sport and it is no different south of the border. In many areas, Directv has the rights to FIFA's World Cup games and is vying for the rights to provide broadcasting for many of the soccer leagues such as the Spanish League and other local leagues.  Directv will provide all of these soccer matches in HD which will set them apart from their competitors.  Although Brazil is by far Directv's biggest market in Latin America, the firm has seen substantial growth in Mexico and  the Caribbean as well.  The only downside to all of this growth is that countries like Brazil have changed laws which will allow for competition to enter the marketplace.  However, it will be a long time before a Brazilian company will actually be able to damage Directv's profits significantly.  

Diversification at Directv

When a firm is diversified they are conducting business in more than one area or particular market.  Being diversified means that a company stands to become more profitable and reduce the risk being driven out of a market by competition or other factors such as economic slowdown.  Since programming costs are constantly rising, which is paid for by the customer and service provider, Directv has decided to offset some of their shrinking margins by doing more than just providing digital cable.  Directv has decided to venture into original programming with their debut series "Rouge".  According to the experts, Directv is trying to either create profits or create a unique selling proposition.  A unique selling proposition is something that sets a firm apart from its competitors.  Most recently, Directv has done this with their NFL Sunday Ticket package.  No other firm offers broadcasting of all the NFL's games.  Now Directv will try to compete with major media conglomerates such as Time Warner.  Directv is experiencing a period of decline in their gross profit margin so now is as good a time of any to venture into new grounds.

http://www.forbes.com/sites/greatspeculations/2012/06/12/directv-tries-its-hand-at-original-programming/