Not “A Good Thing”
Case study - Corporate Governance at Martha Stewart Living Omnimedia: Not “A Good Thing”
Case Synopsis: "The case opens with Martha Stewart's 2005 release from prison following her conviction for obstructing an insider-trading investigation of her 2001 sale of personal stock. The scandal dealt a crippling blow to the powerful Martha Stewart brand and drove results at her namesake company, Martha Stewart Living Omnimedia (MSO), deep into the red. But as owner of more than 90 percent of MSO's voting shares, Stewart continued to control the company throughout the scandal. The company faced significant external challenges, including changing consumer preferences and mounting competition in all of its markets. Ad rates were under pressure as advertisers began fragmenting spending across multiple platforms, including the Internet and social media, where MSO was weak. New competitors were luring readers from MSO's flagship publication, Martha Stewart Living. And in its second biggest business, merchandising, retailing juggernauts such as Walmart and Target were crushing MSO's most important sales channel, Kmart. Internal challenges loomed even larger, with numerous failures of governance while the company attempted a turnaround. This case can be used to teach either corporate governance or turnarounds. "
Case Study Question:
· What might management have done to stabilize revenue and reassure investors after Stewart’s legal troubles surfaced?
· What were the internal and external symptoms of trouble in the years following Stewart’s 2005 return to the company?
· Overall Conclusion of the case.
Question 1: What might management have done to stabilize revenue and reassure investors after Stewart’s legal troubles surfaced?
There are a number of things that management could have done to stabilize revenue and reassure investors after Stewart's legal troubles surfaced. These include:
- Communicating effectively with stakeholders. Management should have been transparent with investors and the public about the situation, and should have provided regular updates on the company's progress.
- Taking steps to mitigate the damage to the Martha Stewart brand. This could have included issuing public apologies, launching new marketing campaigns, and distancing the company from Stewart's personal scandal.
- Refocusing the company's strategy. Management should have taken the opportunity to review the company's strategy and make changes that would be more sustainable in the long term. This could have included expanding into new markets, developing new products, or acquiring other businesses.
- A decline in the Martha Stewart brand. The scandal had damaged the reputation of the Martha Stewart brand, and this made it difficult for the company to attract new customers and retain existing ones.
- A lack of innovation. The company's products and services were becoming increasingly stale, and this made it difficult for the company to compete with newer, more innovative rivals.
- A weak management team. The management team was inexperienced and lacked the skills necessary to turn the company around.
- A changing media landscape. The rise of the internet and social media had led to a decline in print advertising, which was a major source of revenue for the company.
- Increased competition. The company faced increasing competition from other lifestyle brands, such as Oprah Winfrey's OWN network and The Home Depot.