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Name Class ID
Afroza Akhtar 1676
Md. Nahid Shah 1683
Masum
S.M.Hasib Reza 2604
Monira Ahmed Ami 2625
Tithi Dutta 2629
Mashiat Ahmed Ayon 2631
The case
of
The McGraw-
Hill Companies, Inc.
- 2011
Case Statement
McGraw-Hill is currently deciding
what course of action will provide
the most benefit to shareholders:
Moving away from traditional book
publishing and/or completely
divesting the broadcasting division.
Critical Milestones
1917 McGraw and Hills companies
merged to form the McGraw-Hill Publishing
Company, Inc., with James H. McGraw as
president
1966 Standard and Poors was acquired
2005 J.D. Power was acquired
2009 McGraw-Hill Education launches
McGraw-Hill Connect
2011 McGraw-Hill and NJR Clean Energy
Trend Statement

McGraw-Hill began as a publishing


company and has grown through the
years mainly through acquisitions,
mergers, and joint ventures that add to
the ingenuity and effectiveness of
McGraw-Hills current products and
services.
Vision Statement(Actual)

Our vision statement is to


create a smarter, better
world one where
everyone succeeds in the
knowledge economy.
Proposed Vision Statement

Our vision is to be the global


leader that creates a smarter,
better world one where everyone
succeeds in the knowledge
economy through innovative
advances.
Mission Statement (Actual)

The companys mission is to


provide essential information and
insight that helps individuals,
markets and societies perform to
their highest potential.
Proposed Mission Statement
Customers: We believe our first responsibility is to
the educators and learners from all over the world

Products or Services: Our principled products are


textbooks and broadcasting units
Markets: The corporation is a worldwide
competitor
Technology: Using deep research and insights
along with advanced technology
Philosophy: A spirit of sharing and caring
Proposed Mission Statement
Concern for survival, growth and profitability:
Company will grow to its potential and assure profits to its
shareholders
Self-concept: The corporation is committed to provide
service that excite the customers
Concern for public image: Inspires loyalty and committed
to diversity
Concern for employees: Ensures sound working
environment and incentive packages
External Audit
Opportunities:
Demand of commercial and business printing
Emerging economies (China and India) have sharp rises in postsecondary
enrollments
Education-friendly State Government
More uses of E-Learning Technologies(Online Education classes)
Reduction of trade regulations
Enrollments in degree-granting higher education institutions projected to
rise 13 percent to 20.6 million by 2018
External Audit

Threats:
Increase of online book stores
Decrease in Printed Books
Competition among global players
Improved publication of local players using tech-based
publication
Increase of foreign currency charge
EFE (External Factors Evaluation) Matrix
SL Opportunities Weight Rating Weighted
No. Score
1 Demand of commercial and business 0.08 3 0.24
printing

2 Emerging economies (China and India) 0.10 4 0.4
have sharp rises in postsecondary
enrollments
3 Education-friendly State Government 0.04 3 0.12

4 More uses of E-Learning
Technologies(Online Education classes) 0.07 3 0.21

5 Reduction of trade regulations 0.10 3 0.3
6 Enrollments in degree-granting higher
education institutions projected to rise 0.05 3 0.15
13 percent to 20.6 million by 2018
SL Threats Weight Rating Weighted
No. Score
1 Increase of online book stores 0.10 2 0.20

2 Improved publication of local 0.08 2 0.16
players using tech-based
publication
3 Competition among global 0.15 3 0.45
players

4 Decrease in Printed Books 0.20 2 0.40

5 Increase of foreign currency 0.03 2 0.06
charge

Total 1.00 2.69
Internal Audit

Strengths
Highly diversified company
Leading publisher focused on educational service provider
Global presence as operating into more than 40 countries
Strong financial position
Leading information provider
Internal Audit
Weaknesses
Broadcasting unit is to stable yet(Core concentration mainly on
educational sector)
Over dependant on US market
Drop in stock prices
$1.88 billion in Goodwill
Top executives diversity percentage is (20%) low compared to rival
firms
IFE (Internal Factors Evaluation)
SL Strengths
Matrix Weight Rating Weighted
No. Score
1. Highly diversified company 0.10 4 .40

2. Leading publisher focused on educational service 0.08 3 .24


provider

3. Global presence as operating into more than 40 0.10 3 .30


countries

4. Strong financial position 0.10 3 .30

5. Leading information provider 0.08 3 .24


SL. Weaknesses Weight Rating Weighted
No. Score
1. Broadcasting unit is to stable yet(Core 0.05 2 .10
concentration mainly on educational sector)

2. Over dependant on US market 0.05 2 .10

3. Drop in stock prices 0.04 1 .04

4. $1.88 billion in Goodwill 0.06 1 0.6

5. Top executives diversity percentage is (20%) 0.02 2 .04


low compared to rival firms

Total 1.00 2.18


SWOT Matrix
Strength Weaknes
s ses

SO Strategies: WO Strategies:
Add new stores in Launch strong

Opportuni Europe and Asia (S1,


O2)
broadcasting unit
(W4, O2)

ties Add online education


help centre (S2, O4)
Special Pricing (W3,
O3)
ST Strategies: WT Strategies:
Purchase land to Promote diversified

Threats build new stores (S4,


T3)
products (W5, T2)
QSPM Matrix Establish New Broadcasting
Existing Business Unit
SL No. Opportunities Weight AS TAS AS TAS
1 Demand of commercial and business printing

0.08 3 0.24 4 .32


2 Emerging economies (China and India) have
sharp rises in postsecondary enrollments 0.10 4 0.4 4 .40

3 Education-friendly State Government

0.04 3 0.12 3 .12


4 More uses of E-Learning Technologies(Online
Education classes) 0.07 3 0.21 3 .21

5 Reduction of trade regulations 3 0.3 2 .20


0.10
6 Enrollments in degree-granting higher education
institutions projected to rise 13 percent to 20.6 0.05 3 0.15 3 .15
million by 2018
QSPM Matrix
Threats

1 Increase of online book stores

0.10 2 .20 2 .20

2 Improved publication of local players using tech-


based publication 0.08 2 .16 4 .32

3 Competition among global players

0.15 3 .45 3 .45

4 Decrease Printed Books

0.20 2 .40 1 .20


5 Increase of foreign currency charge 3 .09
0.03 2 .06

Total 1.00 2.69


QSPM Matrix
Strengths

Highly diversified company 0.10 4 .40 4 .40

Leading publisher focused on educational service 0.08 3 .24 4 .32


provider

Global presence as operating into more than 40 0.10 3 .30 4 .40


countries

Strong financial position 0.10 3 .30 4 .40

Leading information provider 0.08 3 .24 3 .24

Highly diversified company 0.09 3 .27 3 .27

Leading publisher focused on educational service 0.03 3 .09 3 .27


provider
QSPM Matrix
Weaknesses

1. Broadcasting unit is to stable yet(Core


concentration mainly on educational sector) 0.05 2 .10 2 .10

2. Over dependant on US market 0.05 2 .10 3 .15

3. Drop in stock prices 0.04 1 .04 3 .12

4. $1.88 billion in Goodwill 0.06 1 0.6 2 .12


5. Top executives diversity percentage is (20%)
low compared to rival firms 0.02 2 .04 3 .06

Total 1.00 2.18 5.51


Balanced Scorecard
Financial:
Cost Effectiveness
Cost Effectiveness
Revenue Genration

The
Customer:
Customer: Balance Internal Processes:
Customer
Customer
Satisfaction
Satisfaction d Policy
Policy Effectivenss
Effectivenss
Accountability
Scoreca
rd

Learning
Learning &
& Growth
Growth
Employee
Employee
Satisfaction
Satisfaction
Innovation
Financial Ratios
Total Asset Turnover
6,168,331/7,046,561 = 0.88
For every $1 invested in total assets, McGraw-Hill makes $0.88 in sales,
which is below the industry average.
Capital Intensity
1/0.88 = 1.14

For every $1 McGraw-Hill generates in total revenues, $1.14 needs to be invested into the
company.
Financial Ratios
Operating Profit Margin
1,421,059/6,168,331 = 0.23 or 23%
For every $1 in total revenues, McGraw-Hill has 23 cents to
pay off interest and taxes, which is above the industry
average.
Net Profit Margin
828,063/6,168,331 = 0.13 or 13%
For every $1 in total revenues, McGraw-Hill has 23 cents to
pay off interest and taxes, which is above the industry
average.
Financial Ratios
Gross Profit Margin
(6,168,331-2,346,028)/6,168,331 = 0.62 or 62%
After deducting the cost of sales, McGraw-Hill has 62 cents of
every $1 made to cover all other expenses, which is above the
industry average.
Key Competitors
Comparative Analysis
Particulars McGraw Hill Pearson
Market Capital $ 12.51B 15.26B
Employees 20,755 36,317
Revenue $ 6.26B 9.19B
Gross Margin % 61.88 54.30
Operating Margin % 22.91 12.18
Net Income 844.76M 845.48M
EPS 2.65 2.62
Porters Five Forces
The publishing industry in itself is an oligopolistic
competition. Porters Five Forces is broken down into the five
forces, which are, rivalry among competitors, potential entry
of new competitors, substitute products, power of suppliers,
and finally power of consumers.
Potential development of substitute products
Mentorship
Personal financial analysis
Porters Five Forces
Rivalry among competing firms
Pearson plc.
Houghton Mifflin Harcourt Publishing Company
Reed Elsevier Group
Potential entry of new competitors
Customer loyalty
Advertising and promotion
Lower prices
Economies of Scale
High Profile Clientele
Capital
Porters Five Forces
Bargaining power of suppliers
Paper (Low)
Packaging (Low to Medium)
Transportation (Medium to High)
Labor (Low)
Authors/Editors (Low)
Bargaining power of consumers
Students (Low)
Teachers (Low)
K-12 Schools (Low)
College Universities (Low)
Business professionals (Low)
General Consumers (Low)
Competitive Strategies
Horizontal Integration
Mergers, Joint ventures, and acquisitions
Acquisitions - Standard & Poors
Acquisition - J.D. Power
Joint Ventures - Macmillan Inc.
Mergers McGraw Publishing Company and The
Hill Publishing Company
Competitive Strategies
Market Development
Acquisitions and joint ventures in China and India
Joint venture Tata Group in India
Joint venture New Oriental
Acquisition 1.3 percent stake in Ambow
Education Holdings
Acquisition Pipal Research Corporation
Competitive Strategies
Product Development
Computerized/digital learning
McGraw-Hill launches McGraw-Hill Connect
McGraw-Hill College Division introduces 1st
computer publishing system
McGraw-Hill launches online assessment
platform
Competitive Strategies
Divestiture
Television stations, Business Week, Vista Research
Divested part of its broadcasting unit
Sold its Business Week operations
Sold stake in Vista Research
Recommendation
McGraw-Hill should follow Terry McGraws
dream of splitting the company into two
Strategic Business Units, McGraw-Hill
Financial and Information Services and
McGraw-Hill Education, as well as
continuing to expand into economically
developing nations such as India and China.
Implementation Plan

Divesting the
Broadcasting Strategic
Business Unit
Divest the remaining 9
Television stations
1-2 year timeline
Implementation Plan

Divesting Aviation Week


Previous sale of our Business Week, we
gained $10.5 million
We are looking for about 1/4 of the price
at $2.5 million
This no longer fits our business plan
1-2 year timeline
Implementation Plan
McGraw Hill Financial and Information
Services Business Unit
1 year timeline
Merging the remaining divisions of the Information
Strategic Business Unit with Standard & Poors
SBU and the Financial SBU
This creates McGraw-Hill Financial and Information
Services Business Unit
1 year timeline
Implementation Plan
Change in Organizational Chart
Eliminating some positions in the organizational chart
President of Aviation Week
President of Broadcasting
President of Information and Media
Creating some positions in the organizational chart
President of McGraw Hill Financial and Information Services
President of McGraw Hill Education
This change will occur within 1 year
Implementation Plan
Continue to Expand into China and India:
Education
Many acquisitions and joint ventures
Purchase these companies for $25 million apiece
Profits to reach about $10 million for both
companies
Take about 10 months for us to work out a deal
Implementation Plan
Expand Into China and India: Financial
McGraw Hill looks to acquire the China company
YiBai
Price will be at $10 million
Expected profit per year is nearly $2 million
Will take around 8 months to make contact with,
negotiate with, and acquire YiBai
Sources
McGraw-Hill Financial
McGraw-Hill Education
JD Power and Associates
Platts
Standard & Poors
China YiBai
Strategic Management: Concept and Cases
A home without books is
like a body without a soul