Case Studies for Part I: Apply Daily
© 2005 John Wiley & Sons
Newspaper Crisis: The Cut-Throat Price War
PPT 1-1
Guide To Case Analysis – Ten Commandments
1. Read the case twice, once for an overview and once
to gain full command of the facts; then take care to
explore every one of the exhibits.
© 2005 John Wiley & Sons
2. Make a list of the problems and issues that have to
be confronted.
3. Do enough number crunching to discover the story
told by the data presented in the case.
4. Look for opportunities to apply the concepts and
analytical tools in the text chapters.
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Guide To Case Analysis – Ten Commandments
© 2005 John Wiley & Sons
5. Be thorough in your diagnosis of the situation, you
may make a one- or two-page outline of your
assessment.
6. Support any and all opinions with well-reasoned
arguments and numerical evidence; don’t stop until
you can purge “I think” and “I feel” from your
assessment and, instead, are able to rely completely
on “My analysis shows.”
7. Develop charts, tables, and graphs to expose more
clearly the main points of your analysis.
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Guide To Case Analysis – Ten Commandments
8. Prioritize your recommendations and make sure they
can be carried out in an acceptable time frame with
the available skills and financial resources.
© 2005 John Wiley & Sons
9. Review your recommended action plan to see if it
addresses all of the problems and issues you
identified.
10.Avoid recommending any course of action that
could have disastrous consequences if it doesn’t
work out as planned; therefore, be as alert to the
downside risks of your recommendations as you are
to their upside potential and appeal.
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Teaching Objectives of Apple Daily Case
• To analyze the impact caused by a new entrant,
Apple Daily, on the Chinese newspaper industry.
© 2005 John Wiley & Sons
• To explore Chinese newspaper readers’ attitude and
behavior.
• To discuss the situations under which a market
reader will pursue a cut-price strategy.
• To explore the effectiveness of marketing strategies
applied by different publishers in the newspaper
battle.
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Synopsis (1)
© 2005 John Wiley & Sons
The price of Chinese newspapers was traditionally
determined by the Newspaper Society of Hong Kong
and members of the Society would standardize their
press price accordingly.
Although there was no written rule that members had to
follow the standard price, all newspaper publishers
including non-member, Oriental Daily News,
cooperated by following this rule for many years until
a new Chinese newspaper, Apple Daily, entered the
market in June 1995.
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Synopsis (2)
Apple Daily was launched in the newspaper market with
indirect promotional strategies to reduce its cover
price to $2.
© 2005 John Wiley & Sons
Such price cutting caused confusion and uncertainty in
the newspaper market in Hong Kong where the
selling price was standardized at $5.
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Synopsis (3)
On December 9, 1995, Oriental Daily News sparked the
price war by cutting its newsstand price from $5 to $2
a copy, a giveaway level.
© 2005 John Wiley & Sons
Apple Daily, Sing Pao, Hong Kong Daily News, and Tin
Tin Daily News soon followed suit with their prices
varying from $1 to $4.
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Discussion Questions
About Apple Daily & the Chinese Newspaper
Industry:
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1. Analyze the Chinese newspaper industry according to
Porter’s Five-Factor Model. Which factor(s) would you
most important in this industry?
2. Discuss the key factors leading to the successful
launching of Apple Daily. What do you think is Apple
Daily’s core competence?
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Discussion Questions
About the Price War:
© 2005 John Wiley & Sons
3. When is it justified for a new entrant to adopt a low price
to gain an advantage in the market?
4. As soon as Oriented Daily News reduced its selling price
from $5 to $2, other newspaper also followed suit with a
price cut. Do you think that was a good move? Was there
an alternative to the price cut?
5. Did the price cut spark a sensible war in the Chinese
newspaper industry?
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Discussion Questions - Porter’s Five-Factor Model (1)
The important forces are the rivalry among the
incumbents and the power of suppliers.
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Justification:
The market is dominated by the 5 most popular Chineselanguage newspaper.
The major input into a newspaper is newsprint but its
costs had soared about 30%. The supplier power is very
strong as the Hong Kong market is only a small part of
the global market
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Discussion Questions - Porter’s Five-Factor Model (2)
The threat of substitution (magazines or TV programs)
is also significant.
© 2005 John Wiley & Sons
The threat of entry is relatively low as the newspaper
industry has no specific regulations and barriers against
a new contender.
Buyers have limited power as they cannot affect the
selling price of newspaper.
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Discussion Questions - Porter’s Five-Factor Model (3)
However, when considering some negative factors:
© 2005 John Wiley & Sons
soaring newsprint costs, slack advertising, selfcensorship ahead of Hong Kong’s reversion to Chinese
rule in 1997, the economic recession in Hong Kong
The newspaper industry becomes less attractive.
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Discussion Questions – Key factors to success (1)
Key factors to success:
a. Target segment – a newspaper for the whole family
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b. Marketing concept – identify the changing needs and
wants of newspaper readers. Position itself as a daily
magazine newspaper. Differ from other traditional
newspaper in terms of design, content and writing style.
c. Coordination of the marketing mix elements –
-improve content (product)
-aggressive price-cut strategy
-good incentive to the distributors
-advertising & sales promotion to create awareness
and encourage trials on the product
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Discussion Questions – Key factors to success (2)
© 2005 John Wiley & Sons
d. Distinctive image – creating a reputation for:
-charging the lowest price
-providing prestige quality at a good price
-going all out to give superior customer service
-designing unique product attributes
-coming up with unusually creative advertising
Core Competence:
Innovative newspaper content
& an aggressive marketing strategy
But this competence was not sustainable because it was
easily imitated by other newspapers.
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Discussion Questions – Justification for adopting a
low price (1)
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Difficulty in creating sustainable differentiation
- Even if the publisher is tactful enough to create various
unique selling points or identify promising niches, rivals
are still able to imitate this so-called “uniqueness” without
much difficulty.
Consumer Purchase pattern
- Reading habits are difficult to change and long-term
readers are very unlikely to switch.
- A low price can encourage the variety-seeking behavior
especially from price-conscious customers.
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Discussion Questions – Justification for adopting a
low price (2)
Publishers tend to adopt this strategy in the hope of
enjoying scale economies.
© 2005 John Wiley & Sons
If the publisher can successfully convert price-conscious
readers into loyal readers, it can eventually fine-tune its
cost structure.
Whether the product package (in terms of design, format,
content) of the newcomer is attractive enough to retain
customers remains the key to the success.
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Discussion Questions – Following a price cut is a
good move or not? Alternative actions?
All these newspapers targeted the mass market, they would
have definitely lost a market share if they did not follow
the move.
© 2005 John Wiley & Sons
Discounting a price cannot be a long-term strategy and they
would have to improve the quality of their content
(consumer survey, top 8 criteria concerned content)
Alternative actions:
- Entered the price war and simultaneously improved the
quality and attract new readers (e.g., Hong Kong Daily)
- Cut the price but made no improvement caused readers
to switch (e.g., Tin Tin Daily & Sing Pao)
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Discussion Questions – A sensible war or not? (1)
The main effects of the price war
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1. It sifted out the less competitive newspapers and
reallocated the market share among the rest of the
competitors.
2. It also forced the publishers to improve their newspapers’
quality to meet customers’ wants and needs.
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Discussion Questions – A sensible war or not? (2)
Not a sensible war:
© 2005 John Wiley & Sons
In the short run, it caused publishers to suffer a big loss.
The revenue could not cover the increasing costs of
operation and could not compensate for their losses
through larger market share.
In the long run, it drive out some marginal firms with weak
capital base and led to a higher unemployment rate.
Publishers should have put more effort into content, style,
and paper quality according to what consumers wanted.
The main factor affecting the sales volume is the product
itself rather than promotion.
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