1

Strategic appraisal

TiVo Inc
TIVO VS. CABLE AND SATELLITE DVR

Prepared for:
ATM Sayfuddin
Instructor
College of Business Administration (CBA)

Prepared by:
FRIENDS FOREVER
MGT-403
Section- B
Department of CBA

IUBATInternational University of Business

Agriculture and Technology

11 March 2014
ATM Sayfuddin

Course instructor
IUBAT (International
Technology)

University

of

Business

Agriculture

&

4 Embankment Drive Road, Sector 10,

Uttara Dhaka, 1230.

Subject: Letter of transmittal.

Sir,
We are very pleased to submit our report on Strategic appraisal
TiVo Inc TIVO VS. CABLE AND SATELLITE DVR. It was a
great opportunity for us to work as a reporter on the topic, in this
report we have to elaborate our knowledge what we learn from
our academic career & give experience about TiVo. We tried to
give our maximum effort on preparing this report as best.

Considering the level of hard working, information, processing,

and analysis we believe that this report is a complete one. We
provide our full concentration to prepare this report. We hope that
our study will meet your expectation as well.

Sincerely yours,
Group: FRINDS FOREVER

STUDENT DECLARATION

We are the students of Bachelor of Business Administration (BBA), at IUBATInternational University of Business Agriculture and Technology and declaring
that, this Case on the topic of CASE TiVo IncTIVO VS. CABLE AND
SATELLITE DVR has only been prepared for the fulfillment of the course of
MGT-403.

Sincerely Your

1. Md. Noman Mahamud ..

2. Sabiha Yeasmin .
3. Afrin Nahar ..
4. Khadiza Tuzzahan.
5. Mohammad Shahin

FRIENDS FOREVER

GROUP MEMBERS

SL

NAME

ID

Md. Noman Mahamud

12102020

Sabiha Yeasmin

12102029

Afrin Nahar

12102034

Khadiza Tuzzahan

12102030

Mohammad Shahin

11302101

Acknowledgement

It is a great pleasure to prepare Case project paper on this subject

MGT-403 and gain an experience on Performance Appraisal. I
would like to thank and convey our honorable faculty ATM
Sayfuddin (CBA) IUBAT (International University of Business
Agriculture and technology), for giving us an opportunity to
prepare this Case Study. I would also like to express my sincere
appreciation to his wholehearted support and guidance.

Many thanks are due to Tanvir H Dewan course coordinators of

College of Business Administration & A.B.M. Monirul Haq for their
help and encouragement.

I am grateful to all of them, their help and support made it

possible for to make this report into a desired & successful
ending.

Table of Content

SL

Description

Page
Number

01

Introduction Part

1-6

02

Introduction

7-13

03

Corporate Governance

14-15

04

PEST Analysis

16-18

05

Industry Life Cycle

19-21

06

Value Chain Analysis

22-25

07

Porters Five Forces

26-28

08

Ansoff Matrix Analysis

29-34

09

Financial Report

35-36

10

SOWT Analysis

37-40

11

Recommendation

41

12

Reference

42

Introduction

Background
THE HISTORY OF TELEVISION BEGAN IN 1939 with the purpose of
providing people with entertainment in their homes. It was
followed in 1950 by the invention of the remote controlan
extraordinarily successful invention. Forty years later, two
creative Silicon Valley veterans, Mike Ramsey and Jim Barton,
invented an innovative and advanced technological development,
a digital video recorder (DVR) called the TiVo. They created TiVo to
be TV

Youre Way. According to its founders, With TiVo, TV fits into your
busy life, NOT the other way around. By now, many people may
have heard of TiVo from its being mentioned in popular TV shows
and motion pictures. Even Oprah Winfrey wondered in the
September 2005 issue of her O magazine: Why cant life be
like TiVo? Unfortunately, even by 2007, not very many people
knew what TiVo did or how it did it.

Overview
Pioneered by Mike Ramsay and Jim Barton, TiVo redefined
television entertainment by delivering the promise of
technologies that up until then had only been promised.
Incorporated in Delaware and originally named Teleworld, TiVo
was founded as a company on August 4, 1997. As proposed, the
original concept was to create a home networkbased multimedia.

The main purpose of this paper is to conduct a strategic appraisal of TiVo. The
entire discussion is divided into three phases. The first part examines the external
environment of the company by various tools (PESTEL, Porters five forces

analysis, Industry life cycle). The second stage conducts an internal analysis of the
company through value chain analysis, Ansoff Matrix and financial appraisal.
Finally, the last part suggests some recommendations based on the investigations
done in the first two stages.
Now, before we analyze the external environment let us have a look at the
background of the company.

Current Product of TiVo:

Currently, Tivo develops DVR software and stand-alone units with
a selling focus towards television viewers seeking an improved
and interactive viewing experience. A DVR unit is a set-top box
that performs three different main functions:
Tivo and live television Tivo allows the viewer to pause and
rewind live T.V. programs so they dont miss a moment of their
show. No longer does a trip to the bathroom or the refrigerator
keep the viewer from watching their entire program. Tivo also
automatically records the show you are watching as you are
watching which allows you to rewind it as far as fifteen minutes
into the past. This means if a friend walks in the room and didnt
catch the first ten minutes of the show the viewer can rewind it
back to the beginning and watch it again. Tivo also allows the
viewer to fast forward through commercials that took place as it
was recording the show. So typically after starting the show over
the viewer could eventually catch back up to live television by
fast forwarding through commercials.
Tivo and recording Tivo also works as a video and television
program library storing the viewers recorded movies and
programs on its hard drive. Tivos hard drive comes with a certain
amount of memory and the customer can choose anywhere from
40-120 hours of memory when they purchase their unit. Viewers
can then set-up their Tivo to tape any show they want, much like

a VCR, however Tivo can store many more programs than a VCR
tape would be able to. In addition the viewer can program Tivo to
tape the favorite shows every time they come on no matter what
channel they are on. This means that if a viewer likes Friends
the Tivo is able to record all six episodes in one day from different
channels through just one command. Viewers are also able to
give Tivo commands of what shows they like and Tivo will
automatically find similar shows and tape them.
Tivo Home Media Option A final option with Tivo for extended
cost is networking Tivo programs throughout your household.
This means that a viewer can save a program on their living room
T.V. and later transfer it to their bedroom television. This allows
the viewer much more memory space because they have multiple
units but also more convenience because they are not limited to a
certain room in their house to watch a movie or program they
have saved.
As the above indicates the DVR is a very versatile machine and
because it allows consumers to watch what they want, when they
want, the Tivo and DVR market may prove to be more profitable
than any of us realize.

Quality:
Tivo had not developed a clear strength in the quality of their
product however they have stressed quality in product design and
customer service. They offer a new user-friendly interface with
such menus as the To-Do List, a list that helps users navigate
through the Tivo recording process helping to ensure a quality
experience for the consumer. In spite of Tivos features the
performance of the machine doesnt match up well when
compared to ReplayTVs unit. ReplayTV has higher quality video
output due to special video input plugs on the rear console as well

10

as a commercial skip button, which many consumers find

appealing. They were also the first to offer networking to enable
the customer to watch saved programs in different locations
throughout their house; a feature Tivo has now added for an
increased fee.

Efficiency

The efficiency building block is hard to analyze. Tivo is

attempting to be a stand-alone unit, while other DVR providers in
the industry, such as the non-name brand unit linked with
EchoStar satellite services, come in conjunction with cable or
satellite services. Tivo has clearly not been efficient in producing
and selling their stand-alone units, however Tivo has been
successful in selling and integrating their software into satellite
systems such as Direct TV. The main competitor for the standalone market segment, ReplayTV, is a privately held company,
thus making the financial records hard to gain access to.
Although ROA is not an effective method of rating efficiency,
when compared to Echostar, Tivo looked inferior. Tivo had a ROA
of 68% compared to Echostars 10%. The economies of scale
that Echostar can utilize give them a definite advantage when
efficiency is considered.
An interesting realization regarding Tivo that evolved from this
analysis is that they lack a competitive advantage in any of the
four building blocks. They are not the first to innovate; yet they
are not the low cost leader. Though they are above average in all
categories, they lead none of them. The strength of Tivo lies in
the marketing efforts they have undertaken.

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Current Situation of TiVo:

Tivo has not and is not on its way to creating a sustained
competitive advantage in the industry. Though the most easily
recognized brand of DVRs, Tivo has yet to make a profit in its
near six years of existence. The latest figure was a 4.4 million
dollar loss for the third quarter of 2003. Although that is a $10
million dollar improvement from the previous year, the Tivo
situation still faces considerable roadblocks to sustained profits.
Tivo remains reliant on developing and maintaining relationships
with satellite and cable providers in order to remain competitive
in the industry. Sixty-two percent of Tivos subscription growth
came from an existing partnership with DirecTV to offer DVR
services in conjunction with satellite television. As of now, the
situation of this current relationship is up in the air. Presently,
DirecTVs parent company is in the works to be acquired by News
Corp. News Corp. already owns the British firm NDS, which is
developing its own DVR technology. If this relationship breaks
down, Tivo will find it difficult to find another parent with enough
clout in the cable/satellite industry to record profits. Other
communication giants, such as DISH network and Comcast (DVR
out in Jan. 04), supply generic DVRs and services for a lower
price and cheaper monthly fees. With television viewers
separated so clearly based upon service providers, a long-lasting
mutually beneficial relationship with a cable/satellite company is
a required element for Tivo to achieve success.
The prospects of Tivo being successful in this industry
for a sustainable amount of time are slim and uncertain. The
stand-alone unit for the Tivo cannot financially compete with the
DVR packages that television providers are offering at discount
prices. Tivo is at risk of becoming a niche product, comparable to

12

Apple computers in that only a select few will have a desire to

own the product. On the other hand, Tivo may be able to achieve
profitability and success by concentrating on their core
competencies of software development and marketing.
Tivo has diversified itself in the industry by promoting its
DVR as the user-friendly system in the market. This is due to their
software, which is made up of many different menus the viewer
will use when operating a Tivo DVR. These menus are said to be
simpler for the viewer to understand and use which had pushed
many consumers towards Tivo however high quality software isnt
the main thing that has sold their DVRs. Marketing seems to be
Tivo best competence thus far because it has established their
name in the market resulting in many consumers acknowledging
DVRs as Tivos. This has been extremely beneficial for Tivo
because they have the set the standard in the market and are the
most well known manufacturers of DVRs. Tivo could attempt to
leverage their visibility to consumers as a selling point in creating
profitable relationships with third party DVR manufacturers.

The question however, is will the competences be enough to

bring Tivo to profits? While the answer is hard to find, currently it
seems these competences will not suffice. Tivo does have a
brand name advantage but consumers are slowly seeing more
advertising for generic DVRs and the price is so much less it has
been hard for consumers to ignore. While some are still chasing
after the name and the user-friendly system others will gladly
take the more complicated less popular DVR for the drastic price
cut. Currently a Tivo unit will cost a consumer $100-250 with a
$10-15 per month fee. Customers of a cable company such as
Comcast will be able to get a DVR unit in January 04 for free and
pay only $10 per month. Some other cable companies have
advertised as low as $5 per month. This is the very reason that
competition is growing so quickly in the DVR market and why so

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many companies, especially in cable and satellite, are interested

in manufacturing their own units.

An important lesson learned from Tivo is that consumer demand

of the DVR market is less oriented toward superior quality and
differentiation than it is towards low costs. With the amount of
complimentary products to television viewing, along with
considerably high monthly cable and satellite bills, consumers are
looking to save money in certain areas. With generic DVRs
offering the same basic abilities as Tivo, though in an inferior
manner, consumers are choosing to save their dollars.
If executives expect to turn Tivo into a profitable
company in the DVR industry, they must focus on company
strengths such a software development while phasing out their
weakness of manufacturing. Tivo cannot compete with the
economies of scale that Comcast and DISH possess, thus making
the Tivo stand-alone unit a financial liability to the company. By
ceasing unit production and instead redoubling efforts to research
and development, Tivo can continue to generate innovative and
consumer friendly software for DVR devices. Third party
manufacturing companies that lack sufficient research and
development could be possible suitors of Tivos widely known
software interface.

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Corporate Governance

Top Management
In its early years, TiVos top management
had been personally involved in operations and marketing.
Founder Mike Ramsay often made overseas trips to conduct
meetings and seminars with consumer electronics manufacturers.
This was as an attempt to convince the manufacturers to embed
TiVos software into their products. In order to make sure
everything went well and accordingly to plan, Ramsey focused on
maintaining partnerships. He would rarely be in his office. He
would instead be on the road talking to companies that could help
TiVo build software and subscribers. During his tenure as TiVos
CEO, Ramsey did commit a number of managerial errors.

Board of Directors

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TiVos board of directors consisted of

three executives from the venture capital firms of Kleiner Perkins
Caufield & Byers, Redpoint Ventures, and New Enterprise
Associates, three senior executives from NBC, Coca-Cola, and
Univision Communications, an independent consultant who had
been CFO at Univision Communications, plus TiVos current and
past CEO, for a total of nine members of the board. The board
selected Jeffrey Hinson as its ninth member on January 26, 2007,
for his financial experience as an ex-CFO to join the board and
serve as chairman of its audit committee.

Board of Directors: TiVo

1. Board of Directors: TiVo Inc.
Name of Director Age Principal Occupation
Term
Expires
Director
Since
Michael Ramsey1 56 Former Chairman of the Board & CEO, TiVo
Inc. 2009 1997
Geoffrey Y. Yang1 47 Managing Director, Redpoint Ventures &
General Partner,
Institutional Ventures Partners
2009 1997
Randy Komisar1 51 Partner, Kleiner Perkins Caufield & Byers 2009
1998
David M. Zaslav 46 Executive Vice President, NBC & President,
NBC Cable 2007 2000
Mark W. Perry 62 General Partner, New Enterprise Associates
2007 2003
Thomas S. Rogers 51 President & CEO, TiVo Inc. 2008 2003

16

Charles B. Fruit 59 Sr. Vice President, Chief Marketing Officer,

Coca-Cola Company
2007 2004
Joseph Uva 50 CEO, Univision Communications, Inc. 2008 2004
Jeffrey Hinson2 51 Consultant. Past-CFO, Univision
Communications Inc. 2007 2007

Notes:
1Elected at 2006 annual meeting.
2Added in January, 2007.
2. Board Committees
(as of 1/31/2007)
Audit: Hinson (Chair), Fruit, Perry
Compensation: Yang (Chair), Uva
Nominating & Governance: Komisar (Chair), Yang
Pricing: Zaslav (Chair), Perry
Technology: Ramsey (Chair), Komisar, Yang

PESTEL analysis

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P Is for Political

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The political segment centers on the role of governments in

shaping business. This segment includes elements such as tax
policies, changes in trade restrictions and tariffs, and the stability
of governments .Immigration policy is an aspect of the political
segment of the general environment that offers important
implications for many different organizations.

E Is for Economic
The economic segment centers on the economic conditions within
which organizations operate. It includes elements such as interest
rates, inflation rates, gross domestic product, unemployment
rates, levels of disposable income, and the general growth or
decline of the economy, the economic crisis of the late 2000s has
had a tremendous negative effect on a vast array of
organizations. Rising unemployment discouraged consumers from
purchasing expensive, nonessential goods such as automobiles
and television sets. Bank failures during the economic crisis led to
a dramatic tightening of credit markets. This dealt a huge blow to
home builders, for example, who saw demand for new houses
plummet because mortgages were extremely difficult to obtain.

S Is for Social
A generation ago, ketchup was an essential element of every
American pantry and salsa was a relatively unknown product.
Today, however, food manufacturers sell more salsa than ketchup
in the United States. This change reflects the social segment of
the general environment. Social factors include trends in
demographics such as population size, age, and ethnic mix, as
well as cultural trends such as attitudes toward obesity and
consumer activism. The exploding popularity of salsa reflects the
increasing number of Latinos in the United States over time, as
well as the growing acceptance of Latino food by other ethnic
groups.

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T Is for Technological
The technological segment centers on improvements in products
and services that are provided by science. Relevant factors
include, for example, changes in the rate of new product
development, increases in automation, and advancements in
service industry delivery.

E Is for Environmental
The environmental segment involves the physical conditions
within which organizations operate. It includes factors such as
natural disasters, pollution levels, and weather patterns.

L Is for Legal
The legal segment centers on how the courts influence business
activity. Examples of important legal factors include employment
laws, health and safety regulations, discrimination laws, and
antitrust laws.

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Indrustry Life Cycle analysis

The industry life cycle is not the same as the product life cycle,
because within an industry there is a constant updating of
products. For example TiVo Inc.TV manufacturers first produced
monochrome TVs, then colour TVs and subsequently home
entrainment systems. Within the colour TV segment, the screen
technology has evolved from cathode ray displays to flat screens
such as plasma screens. Recently the first 3D TVs and Internet
enabled TV sets appeared on the market.
However, eventually some industries may contract sharply and
even disappear. For example passenger sea transport (other than

21

cruising) has been replaced by air travel; photo-chemical

photography has been replaced by digital photography; video
rental shops are being replaced by digital downloads or video on
demand.
Industries evolve over time, both structurally and in terms of
overall size.
The industry life cycle is measured in total industry sales and the
growth in total industry sales. The industry structure and
competitive forces that shape the environment in which
businesses operate change throughout the life cycle. Therefore a
business's strategy must adapt accordingly. It is useful to consider
the evolution of the industry life cycle in the context of Porters 5
Forces.

Introduction
In the introduction stage there are few competitors and there is
no threat from substitutes because the industry is so new. The
power of buyers is low, because those who require the product
are prepared to pay to get hold of supplies that are limited.
Suppliers exert some power, because volumes purchased are still
low and the industry is relatively unimportant for suppliers.

Growth
In the growth stage the number of competitors increases rapidly
as other firms enter the growing industry. However, because at
this stage growth in demand outstrips growth of capacity, rivalry
among firms is kept in check. The power of buyers is still very low
because demand exceeds supply. Often industry growth is
associated with high profitability. While at this stage firms may
profitable, they could still be cash absorbing and running risks as
they jockey for position and market share.

Maturity
As the industry enters maturity, the power of buyers is increasing

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because capacity matches or exceeds demand. In contrast, the

power of suppliers has declined because by now the volumes
purchased by the industry are very important to suppliers. Losing
a large customer could be very damaging to suppliers. The threat
from substitutes is now growing. The industry will start to
consolidate, possibly through mergers and acquisitions. Mature
industries are settled in, risks are low and cash is generated.
However, rivalry among competitors is fierce and falling prices
pose a serious threat to profitability.

Decline
The decline stage poses new challenges. Capacity exceeds supply
thereby increasing the power of buyers. The weakest competitors
will withdraw from the industry, leading to a decline in the rivalry
between firms. At this stage firms may also combine forces to ask
for government intervention or subsidies to help to protect the
declining industry. The threat of substitutes is high; indeed
substitutes are often the root cause of decline. However,
managed correctly, a slowly declining industry can produce
attractive returns for investors because there is no new
investment as the industry is gradually run down and milked for
cash.

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Value Chain Analysis

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Value Chain Analysis

Value chain analysis is a powerful tool for analyzing the
activities within an organization that bring products and services
to market. The difference between the cost of conducting these
activities and the amount customers are willing to pay for the
final product or service is the profit margin. Information
technology can reduce the cost of these processes, thus
increasing profit margins.
A value chain has primary and supporting activities. The primary
activities are those that take some raw material and transform it
into something of greater value converting oil into gasoline or
data and information into a report, for instance. Some primary

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activities are: inbound logistics, operations, outbound logistics,

marketing and sales, and service. Inbound logistics entails
purchasing and receiving the raw materials. Operations handle
the actual conversion of the raw materials into the finished
product. Outbound logistics get the product to the customer. Sales
and marketing ensures that the customer will actually buy the
product. Finally, service makes sure the product keeps working
after it is purchased.
Supporting activities are those functions, such as accounting and
human resources, which the company requires to do business, but
that do not directly add value to a product or service.
Companies can gain a strategic advantage over the competition
by focusing on a particular portion of the value chain. For
example, a company that primarily provides service and support
would focus on the service activities.
Exploring the rest of TiVo product is value chain we see that
operations are the actual assembly of the computers. However,
most other computer makers are able to assemble computers as
efficiently as TiVo. Outbound logistics is concerned with getting
the finished computer to the customer and is primarily handled by
third parties, such as DVR. Marketing and sales develops
marketing campaigns and handles taking orders. TiVo has an
extensive service operation, which handles customer calls, but
contracts with other companies for its onsite service. A variety of
supporting activities, such as human resources and research and
development, ensure that the primary activities run smoothly.

When a company starts to hear their customers saying its very

difficult to do business with you without providing exact details;
when a company sees their internal customer service scorecard
showing good numbers, but the customer survey result shows
poor service; or when a company starts to see their long term

26

customers switching to their competitors; it is the time for the

company to evaluate their value chain to understand what they
need to do win the trust and confidence back from their
customers.
However, it seems difficult to figure out what customers are really
looking for, and its difficult to decide which actions to take to
improve the customer experience. There are many functions in
the company, what exactly are the areas causing negative
customer experiences? In order to understand what activities are
leading to customer satisfaction, we can begin with the generic
value chain and then identify relevant firm specific activities. A
value chain is a chain of activities. Products pass through all
activities of the chain in order and at each activity the product
gains some value. (Wikipedia) Using value chain analysis will
quickly help a company map out touch points with customers,
capture pain points, and identify opportunities for process
optimization. Id like to use a case of an equipment rental
company to explain how value chain analysis is used to identify
issues in order to enhance customer experience.
In this case, customers choose to rent instead of buy equipment
for a lower cost but at the same time expect good service.
Customers can have the company deliver equipment to them or
pick them up with their own trucks. After finish using the
equipment, the customer can self return them to the company
service locations or the company will arrange collection from
customers upon request. Customers pay an initial fee when they
receive equipment and then start to pay rent based on the days
of usage. Below is the value chain analysis I did for the company
to understand how each function interacts with customers and
how they can impact customer services. Please note below
analysis only include primary activities. Supporting activities such
as procurement, technology, human resource and firm

27

infrastructure are not in the analysis, although they can also

indirectly impact customer experience from different prospective.
Primary functions of inbound logistics, operation, outbound
logistics, marketing & sales, and customer services are interacting
with customers on a daily basis; hence activities under those
functions directly influence customers satisfaction and their
purchasing decision. By breaking down those functions into
activities, we can easily see the components in the value chain
and how they create and build value for customers. By asking
questions for each activity, we can thus realize what customers
are expecting for each activity and whether there is enough to be
done to guarantee customer satisfaction.
Im not going to explain each activity in detail. The result of this
exercise is to help TiVo executives realize the challenges from
their existing process structure and to make the right decisions
and actions to truly serve customers. Executives should also
face the fact that internal metrics are not always reflecting a
customers true experience. When the metrics are designed to
meet internal criteria and when those numbers are tied to
employee performance bonuses, we can expect that employees
are incented to make a good number instead of to provide good
service. The company measures on-time based on the final date
stored in the system. When a shipment is going to be late, the
employee in Logistics calls the customer to get approval of
changing the date of delivery in the system, as if customer had
another choice. At the same time, the TiVo defines the on-time
delivery window which is not necessarily what the customer is
asking for. Using a six sigma term, there is a gap between internal
specifications and external customer measurement.
Unfortunately, because of political reasons and high pressure for
performance, even functional high level executives are not
willing to change the wrong measurements to correctly reflect
real performance. No wonder that even with high performance

28

numbers in the service scorecard, we cannot prevent customers

from switching to competitors.
From such a value chain analysis exercise, many functional
experts can identify process improvement opportunities and take
necessary projects to reengineer processes. However, without
further data analysis, the analysis wont lead to a priority list to
allow the company to put the limited resources to the most
critical processes. Besides, the TiVo will not make fundamental
changes without establishing performance metrics truly reflecting
customers requirements. Value chain analysis can help
companies to understand where they can create value for
customers. However, only when the company truly embraces
customer experience and makes fundamental changes will the
value chain create real value for customers.

Porter Five Forces

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1. Risk of entry by potential competitors- The risk of

new entrants is high.
There are low barriers to entry in this industry, as seen by the
latest influx of new competitors who have produced generic DVRs
to compete with high end units such as Tivo. The market is still
growing at an exceptional rate, so more and more potential
competitors are jumping in to attempt to gain some market share.
Though Tivo does have a strong, loyal following, there is still a
large amount of consumers out there who dont need all the
features that Tivo has to offer, and are willing to purchase
cheaper versions provided by new competitors.

2. Rivalry amongst established companies The

rivalry amongst companies is heating up. Price wars, especially
because Christmas is around the corner, have begun to dominate
the industry. Echostar provides a free DVR unit integrated into
their satellite receiver, along with cheaper rates than what Tivo
can offer. Comcast is coming out with its DVR that it plans to
market the same way Echostar did. Even ReplayTV has cut the
cost of its monthly service in order to tempt consumers to
purchase their unit. Switching costs are relatively high for a
consumer, so the initial purchase of a unit is where the battle for
market share is won and lost.

3. The bargaining powers of buyers This is very high

for the DVR industry. There are ample substitutes for the end-user
consumer to purchase that offer the same service that Tivo does.
Tivo also faces high buyer power when dealing with satellite and
cable industry, potential buyers of their technology to integrate

30

into their own systems. There are relatively few cable and satellite
providers, leaving Tivo with little power over them. These
companies have the ability to dictate pricing of the Tivo
technology because they can always develop or purchase their
own generic DVR provider.

4. Bargaining powers of suppliers this is low for a few

reasons. The products that the suppliers sell have many
substitutes; no single supplier has a product that is clearly unique
or different. Tivo could even possibly build the same products its
suppliers sends them. The main rationale for why supplier power
is low is that the electronics industry is saturated with thousands
of suppliers who produce similar products, and if required, a
company could easily produce a product that they have never
produced before just to meet demand.

6. Substitute products There are few available. The VCR

is a viable substitute product for consumers who want to
record live television but dont want to pay for a service like
the DVR. VCRComputer software also offers a viable option
to record live television. Snapstream, a program that allows
the consumers computer processor to record live television
without paying any subscription fees has recently hit the
market. Many technology savvy individuals might be
interested in a product like this.

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Ansoff Matrix Analysis

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Market penetration
Market penetration is the name given to a growth strategy where
the business focuses on selling existing products into existing
markets.
Market penetration seeks to achieve four main objectives:
Maintain or increase the market share of current products
this can be achieved by a combination of competitive pricing
strategies, advertising, sales promotion and perhaps more
resources dedicated to personal selling
Secure dominance of growth markets

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Restructure a mature market by driving out competitors; this

would require a much more aggressive promotional
campaign, supported by a pricing strategy designed to make
the market unattractive for competitors
Increase usage by existing customers for example by
introducing loyalty schemes
A market penetration marketing strategy is very much about
business as usual. The business is focusing on markets and
products it knows well. It is likely to have good information on
competitors and on customer needs. It is unlikely, therefore, that
this strategy will require much investment in new market
research.
In the Ansoff matrix, market penetration is adopted as a strategy
when the firm has an existing product and needs a growth
strategy for an existing market. The best example of such a
scenario is the telecom industry. Most telecom products are
existing in the market and they have the same market to cater to.
Thus in such cases the competition is higher and you might have
to go out of the way to cater to your market or to increase your
firms market share.
Several things have to be considered when adopting the Market
penetration strategy. By using market penetration, you are
ensuring that only the existing resources of the firm are used and
no extra costs need to be incurred in setting up a new unit for . At
the same time, your current group of employees is the best
people to notice any growth opportunities in the existing market.
Thus they need to be used optimally by providing them the right
information at the right time. There needs to be a combination of
marketing and sales promotions if you have to grow in an existing
market with an existing product.

34

On the other hand, market penetration might not be the strategy

you are looking for. What if the market becomes too saturated?
Fighting for a higher market share in a saturated market accounts
for higher expenses and lower profitability. Thus the market
analysis needs to be spot on and the market penetration strategy
should be adopted only if there is scope for increasing market
share in an existing market.

Market development
Market development is the name given to a growth strategy
where the business seeks to sell its existing products into new
markets.
There are many possible ways of approaching this strategy,
including:
New geographical markets; for example exporting the
product to a new country
New product dimensions or packaging: for example
New distribution channels (e.g. moving from selling via retail
to selling using e-commerce and mail order)
Different pricing policies to attract different customers or
create new market segments
Market development is a more risky strategy than market
penetration because of the targeting of new markets. Market
development is the second market growth strategy which can be
adopted as per the Ansoff matrix. The market development
strategy is used when the firm targets a new market with existing

35

products. There are several examples of the market development

strategy including leading footwear firms like Adidas, Nike and
Reebok which have started entering international markets for
market expansion. Every other day we hear of one or the other
companies thinking of lunching their products in a new country.
Thats the perfect example of market development. Similarly, on a
micro level, expanding from a current market to another market
where your product does not exist is also an example of market
development.
For market development, you have to treat your product as a new
entrant in the market. Thus there are several factors which
influence the market development strategy of a firm. If the
product already has a high brand equity, it possibly just needs
distribution points in the new market (Example Walmart). The
same goes if the product is a needs product and known to be of
high quality. On the other hand, if the product is not established in
your current market, it is not recommended to start a market
development strategy. You need to first cater your existing
markets.
The risk factor of a market development strategy is higher. This is
because lots of investment needs to be done when entering new
markets. You need to advertise and market your product for the
customers to adopt it. For the same you need to invest in admin
expenses, advertising expenses, possibly new production
facilities, so on and so forth. Thus you might have to develop new
strategic business units itself to have a strong market
development. This is exactly what is done in international firms,
wherein the unit in another country is treated as a separate
business unit or a profit center.

36

Product development
Product development is the name given to a growth strategy
where a business aims to introduce new products into existing
markets. This strategy may require the development of new
competencies and requires the business to develop modified
products which can appeal to existing markets.
A strategy of product development is particularly suitable for a
business where the product needs to be differentiated in order to
remain competitive. A successful product development strategy
places the marketing emphasis on:
Research & development and innovation
Detailed insights into customer needs (and how they
change)
Being first to market
Product development in the Ansoff matrix refers to firms which
have a good market share in an existing market and therefore
might need to introduce new products for expansion. Product
development mainly happens when you have a good customer
base and you know that the market for your existing product has
reached saturation. Thus you cannot apply the market
penetration strategy. You can therefore opt for a new product
development strategy which caters to your existing market.
Lets take an example Why do firms like P&G and HUL keep on
introducing new products in different categories? This is because
both of these top FMCG firms are already present in the market.
They are only leveraging their strength in the existing market by
introducing new products. Imagine if HUL today introduces a soap.
It is already selling its shampoos and soaps in all grocery stores
across a city. Thus it will start selling this new product in the same

37

distribution channel and achieve new product launch as well as an

improvement in profitability just by using its current market.
The product development strategy, like the market development
strategy is risky. This is because product development involves
investing in developing a completely new product. The product
will also need further investments for distribution, marketing and
manpower. Furthermore, by introducing a wrong product which
does not gain acceptance in the market, you might be affecting
your brand equity. Thus plotting your firm in the right quadrant
on the Ansoff matrix becomes critical.

Diversification
Diversification is the name given to the growth strategy where a
business markets new products in new markets.
This is an inherently more risk strategy because the business is
moving into markets in which it has little or no experience.
For a business to adopt a diversification strategy, therefore, it
must have a clear idea about what it expects to gain from the
strategy and an honest assessment of the risks. However, for the
right balance between risk and reward, a marketing strategy of
diversification can be highly rewarding.
Diversification is a strategy used in the Ansoff matrix when the
product is completely new and is being introduced in a new
market. The best example for Diversification can be big groups
like Tata or Reliance which initially started with one product but
have expanded into completely unrelated segments by

38

introducing new or their own products. Tata for example has

presence in steel, motors and now in retail.
However, Diversification should be taken as a last option and
should be adopted only when the company is very strong
financially. As seen in the above two strategies, if the product or
the market changes, the company has to do some heavy
investments to be successful. In case of Diversification, both
product and market are new and hence the amount of investment
required would be high thereby considerably increasing the risk
factor. Therefore we see larger groups with deep pockets and
multiple SBUs actually using the process of diversification.
Thus depending on your product and your existing customer base,
you can decide which quadrant you fall under in the Ansoff
matrix. Once you know your position, the Ansoff matrix also
outlines the right kind of strategy to adopt. The Ansoff matrix is
especially useful for multi product organizations or organizations
which are planning to increase market share.

Financial Report
Year Ending January 31, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 89,079
Short-term investments 39,686
Accounts receivable, net of allowance for doubtful accounts of
$271
Inventories 29,980
Prepaid expenses and other, current 3,071

39

Total current assets 182,457

LONG-TERM ASSETS
Property and equipment, net 11,706
Purchased technology, capitalized software, and intangible assets,
net 16,769
Prepaid expenses and other, long-term 1,018
Total long-term assets 29,493
Total assets $ 211,950
Liabilities and Stockholders Equity (Deficit) Liabilities
Current Liabilities
Accounts payable $ 37,127
Accrued liabilities 36,542
Deferred revenue, current 64,872
Total current liabilities 138,541
Long-Term Liabilities
Deferred revenue, long-term 54,851
Deferred rent and other 1,562
Total long-term liabilities 56,413
Total liabilities 194,954
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERSEQUITY (DEFICIT)
Preferred stock, par value $0.001:
Authorized shares are 10,000,000;
Issued and outstanding shares none
Common stock, par value $0.001:
Authorized shares are 150,000,000;
Issued shares are 97,311,986 and 85,376,191, respectively and
outstanding shares are 97,231,483 and 85,376,191, respectively
97 85
Additional paid-in capital 759,314
Deferred compensation (2,421)
Accumulated deficit (741,845)
Less: Treasury stock, at cost 80,503 shares (570)
Total stockholders equity (deficit) 16,996 (29,372)
Total liabilities and stockholders equity (deficit) $ 211,950

40

SWOT Analysis

41

Tivo, a company currently on the forefront of the DVR industry,

has an array of opportunities at its fingertips. First, the DVR
industry is on the rise, with analysts expecting an increase to 25
million homes in 2007, up from 3 million homes today. With this
exploding consumer base, Tivo can maintain high profit margins if
it can secure a long- term significant market share. Tivo can also
license out its product to electronic companies such as Panasonic
to form strategic partnerships. The opportunities of new product
innovations such as the new DVD recorder with Tivo capabilities
could garner a lot of attention from television consumers in the
near future.
Advertising and promotion also lends itself to being an
opportunity for Tivo. Tivo has sponsored content such as free
concerts or special features that are paid for by companies
seeking to advertise their products in a unique way. From special
movie behind the scene features to free live concerts to promote
a new CD release, Tivo has the opportunities to utilize this
marketing aspect of their operating system.
The global market is another temping opportunity. The
United States is just one of many countries that enjoys viewing
television and that can provide a strong consumer base for Tivos
products. Once Tivo becomes more stable and accepted in the

42

United States, a push for control of foreign markets could become

the next step for Tivo, Inc.

The DVR industry is not without its threats though. A major

threat to Tivos survival is that cable and satellite providers are
producing their own generic DVR unit to market to their
subscription base. DISH networks has already introduced a
generic DVR that reached 1 million subscribers two months before
Tivo hit that plateau, even though Tivo had been working towards
the goal several years more. Comcast Cable is also beginning to
introduce their own DVR technology to be offered out in
conjunction with cable services. Ad campaigns have hit the air
wave on behalf of Comcast that are essentially designed to
increase the awareness of Comcast technology while eliminating
the branding that Tivo has over the DVR industry.

Opportunities:
The embryonic DVR industry
Unique promotional and advertising capabilities
New relationships with cable companies
The Global market

43

Threats
Low barriers of entry
Generic DVRs such as Comcast and Echostars units
Buying power of satellite and cable companies the
stand alone box becoming obsolete

Strengths

44

Equity investors such as Cox Cable, Comcast, Showtime,

Disney, and TV Guide Interactive.
Patents for pioneering innovations associated with DVR
software & hardware.
Marketing campaign has developed brand recognition in
the DVR market.
Licensing technologies to Sony, Toshiba, Pioneer, and
DirecTV.
With TIVO integrating their technologies with other
companys products, TIVO can drive adoption for these
next-generation products which will drive adoption for the
TIVO service.
Unique capabilities to measure audience viewing of
programs and commercials that can help broadcasters
design programming with greater value to advertisers &
help them effectively target messages.

Weaknesses
Stand-alone systems are not accepted as TIVO expected.
Need to have Board of Directors from companies that
influence future of DVR industry. IE) Cable
Single supplier for key product components
Over reliance on partners
Separated from customers by partners
Cannot make financial obligation without more investments
Outsource key value added functions

45

Recommendation
Tivo does not have a sustainable competitive advantage. This is
due primarily to the fact that they are competing in a market that
is in the early stages of development. To date, Tivo has been
experiencing a negative return on invested capital, which is how
we measure the competitive advantage that a company has in its
industry. However, Tivo does have strengths that can potentially
lead them into a leadership position and attain a competitive
advantage in the DVR market. They currently provide a multitude
of features that are not available with the generic versions of the
DVR that are offered by their competitors. They are the first
movers in the industry and are constantly searching for ways to
keep an edge on the rest of the field. By advertising through
mainstream media channels and creating partnerships with well
established firms, Tivo has been able to get their name out into
the public which is helping them gain market share.
Tivo may be able to become a major player in the home
electronics market by broadening their product lines. With only
the DVR Tivo is limiting their potential to the acceptance of this
one product and is making themselves vulnerable to competitors,
such as the cable and satellite providers. By diversifying their
product offering they may be able to use their marketing efforts
to segment different markets and provide more security to their
long-run viability.

46

REFERENCES

http://www.TiVo.com/
http://en.wikipedia.org/wiki/TiVo
http://en.wikipedia.org/wiki/High-definition_television
http://egotron.com/ptv/ptvintro.htm
http://news.com.com/TiVo,_Comcast_reach_DVR_deal/
2100-1041_3-5616961.html
http://news.com.com/TiVo_and_DirecTV_extend_contract/
2100-1038_3-6060475.html
http://www.technologyreview.com
http://www.fastcompany.com/magazine/61/TiVo.html
http://iinnovate.blogspot.com/2006/09/mike-ramsaycofounderof-TiVo.html
http://www.acmqueue.org/modules.php?name_Content&pa
_showpage&pid_53&page_7
http://www.internetnews.com/stats/article.php/3655331

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http://thomashawk.com/2006/04/TiVo-history-101-howTiVo-built-pvr_24.html
http://www.tvpredictions.com/TiVohd030807.htm