1. Introduction
A newspaper is usually a daily or weekly publication which have lasted news about some events or information of special or general interest. The world is now changing gradually and globalization has become a trend. People have to be more open to access to new information and lasted news in order to keep up with the world. Hence, it is important for the newspaper publishers to understand its future market and competitors in order to strengthen its company. In New Zealand, there are several newspaper publishers that own many newspaper titles. However, it could be said that the newspaper industry in New Zealand is a duopoly with two key competitors: APN News and Media (APN) and Fairfax Media since they are the two biggest companies aside from many independent publishers. This report is to conduct an external analysis of the Newspaper Industry in New Zealand with the application of Porter’s Five Force analysis and PEST analysis. It will also point out some main problems that affect the industry such as the threat of cheaper, more convenient substitute services, the effect of new technology as well as the change in the economy and so forth.
2. Five Forces Analysis
Threat of new entrant
Aside from the newspapers that are published by the two main companied within the industry, there are a lot of weekly newspapers that have a national scope and many other newspapers for particular suburbs or for subcultures communities published by several independent publishers. The biggest barrier in this industry is that New Zealand has many newspapers titles but doesn’t have a true national newspaper so each city now has its own daily newspaper. Each daily newspaper has a near monopoly in its main circulation areas with about 79% of regional readers only read their local daily newspaper(2012).
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Hence, the threat of entrant of newspaper industry in New Zealand is not really high. Bargaining power of customers
Buyers’ power refers to the ability of customers to influence the demand and price of the industry. There are numerous newspaper titles all over New Zealand. Since each region and city has at least one daily newspaper and there are not many differences in the price of newspaper, there is a high possibility of readers deciding to switch to another newspaper title. Furthermore, with many news sites on the Internet, people can choose to read online instead of paying for a newspaper. Hence, they can access more not only to the news in the local but also around the word.
Bargaining power of suppliers
Another force in the Poter’s Model is suppliers’ power. According to Porter, the bargaining power of suppliers is one of the forces that shape the competitive environment of an industry. For companies to survive in the industry, it has to depend on the supply of material, labor and many other supplies. The newspaper industry requires cost for papers, ink, printing and so forth. However, the cost of these supplies in New Zealand is not very expensive and many newspaper publishing companies start to switch to the digital newspaper, the power of supplier in this industry is fairly low.
Threat of substitute products or services
A substitute is a product that has the same or similar function as another product. In the newspaper industry, there are many services that can substitutes for newspaper. Nowadays, there are many other media integration that can help people to access for more information and news. They can not only watch news on television, listen to the radio but can also read digital newspapers on the Internet. These free services offer people with more choices and options regarding to news. Thus, there is a high threat of substitute services within the industry.
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Intensity of competitive rivalry
As mention above, the New Zealand newspapers are dominated by Fairfax New Zealand and APN News & Media, with Fairfax having 48.6% of the daily newspaper circulation and APN News and Media having 42.4% (Rosenberg, 2008).
There is very little different between the size and strategy of the two companies. Besides, they both published many newspapers titles in many regions across New Zealand and have its news sites ranking among the top websites for Kiwi (2013).
Therefore, it can be said that the intensity of competitive rivalry between the two companies is quite high.
3. PEST Analysis
Political Factor
Political and legal influences have great impact on the media. The media, especially the newspaper plays an important part in New Zealand’s democracy. The government has enforced many Acts such as The Bill of Rights Act 1990, the official information Act 1982, the defamation Act and so forth to ensure the rights and responsibilities of individuals toward the use of media (McMillan, 12) Hence, the newspaper industry is now having more and more freedom in the publishing topics. This may result in more releases and analysis information about parties’ performance in the government in the future. Some newspapers such as Christchurch’s The Press were funded by parties to encourage the public’s political interests and influence the public’s perception about their political goals. Thus, political parties will also play an important part in changing the readership’s interest using their political power and beliefs.
Technology Factor
With the development of technology, especially the Internet, the mass communication has changed significantly. online newspaper has gradually substituting the prints. Since it is easier to access and require lower cost, online newspaper has become a threat for many prints publications. People can now sit home and access many sites with news about everything around the world. Many publishing companies in New Zealand are now offering their readers the online version of their daily prints, for example nzherald.co.nz, waikatotimes.co.nz, aucklandnow.co.nz and so on. Readers are now less demanding toward printed newspapers which affected greatly on newspaper industry. Some argues that in the future, with many digital newspapers online, there will no longer need for the printed ones.
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Economic Factor
Technological progress has led to the development of the economical environment of the industry. Many companies have to try their best to compete with others for fear of losing their business. The newspaper industry has also been affected by the changed of the economy, especially during financial crisis. The introduction of the Internet has offered individuals the ability access directly to their interested topics without wasting time shifting through other news and advertising pages. The cost of copy price, the decline in advertisement revenue, the cost for labor and the drop in circulation also make it harder for companies to survive in this industry in the long run.
Socio-cultural Factor
The socio cultural environment affects greatly on readers’ demand and tastes of newspaper. The development of technology has changed readers’ habit and behaviors of accessing news by offering multimedia and interaction. In the past, people used to have little time in the morning to read for news before going to work. However, people can now read news anywhere, anytime they want with their laptop, smartphone or tablet since it not only help them save time but also cost less. Hence, people can expect a future where information and news can be updated faster.
4. Strategic Issues
With the gradual changing of the economy and technology, the biggest problem company has to consider when running a business in the newspaper industry is the development of technology. The Internet has given people faster, more convenient, and easier options to access the news all over the world. However, this also changed people’s habit and trend of reading news. They now pay less attention to the traditional printed newspaper and hence, purchase them less. According to ABC and ACNielsen, there has been a great decline in the industry between 2012 and 2013 (Ahmed, 2013).
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The New Zealand Herald lost 33,000 readers, followed by The Sunday News with the lost of 24,000. The Waikato Times lost 13,000 readers and The National Business Review lost 10,000 (Ahmed, 2013).
The companies within this industry also have to face with the threat of substitute products, the power of customers and the intensity of rivalry. The Internet is making it easier for other companies to compete with Fairfax and APN through switching to the digital world. Not only does it cost them less, but also more suitable with the trend of readers. Hence, companies, especially Fairfax and APN, need to have new strategy to overcome these problems.
5. Conclusion
In short, the newspaper industry in New Zealand is affected greatly by the development of technology and the unstability of the economy. It has changed both the ways people accessing news and the trend of the printed media, especially newspaper. Many companies has changed not only their printed but also digital newspaper in order to compete better in the industry. Although there are some issues within the industry, companies with the advantages of technology should try to compete in as the drop in the printed newspapers can be covered by the rise in the digital ones in the future.
References
(2012).
Retrieved from http://www.newsworksnz.co.nz/images/files/PDFs/Regional_Presentation.pdf (2013).
Retrieved from http://www.newsworksnz.co.nz/images/files/PDFs/resources/Newspaper_Facts.pdf Ahmed, S. (2013, May 24).
Retrieved from Stoppress: http://www.stoppress.co.nz/blog/2013/05/year-year-newspaper-circulations-drop
