Virgin Media versus News Corps a simulated case of Decision

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Virgin Media versus News Corp -Decision Making and problem solving Virgin media is a prominent company in the telecommunication market in the United Kingdom. The telecommunication industry is however prone to takeovers, partnership or joint venture and networking. Where virgin media does comes into the discourse? It is the takeover of BSkyB. Virgin media is looking forward to placing a bid for 61 per cent of the pay TV company. News Corp is also bidding for BSkyB. In the midst of the entire bidding politics, News Corps starts an intensive lobbying which is against ethics, these leaks to the public and other bidders seem to prepare a legal case against News Corp.

News Corp faces a three count charge; first is placing of a call from James Murdoch (News Corp executive) to Vince cable (Business Secretary of B2Bsky) , the other is the perceived purchase of B2Bsky by News Corp would give the company unlimited market power and would have a serious and far reaching consequences for media plurality (Robinson 2010). Finally, it is an act against public interest grounds and as such must be aborted. Virgin media must make a decision of whether to sue for infringement considering that an executive of News Corp was lobbying either directly or indirectly for BSkyB which is against all ethics. The legal arm of both companies and the management board is plunged into making decision.

The entire situation seems cloudy, with Virgin Media picking up a legal case and demanding that News Corp pays an infringement fee of £40,000,000 and triple punitive penalties of £120,000,000. The lawyer representing Virgin Media tells News Corp lawyer that Virgin media might be willing to settle the case out of court by granting Virgin media half of the 61% pay TV company. This would allow both sides to reap potential future revenues from the pay TV company with shared risks , uncertainties and profits. If Virgin media choose to defend the law suit and lost, the future profit or sales expected from the pay TV company would be lost.

A decision has to be made in between defending the law suit or settling it out of court.

Fig 1 : Stock Chart for BSkyB

Source : guardian.co.uk/business/

The dwindling stock share of BSkyB might be fluctuating, but there are still hopes of profiting, that seems to be why News Corp stepped up the lobbying for the purchase of 61 per cent of the company. With a 4 to 8 months revival , the company might be revived; the difficulty in making a decision here is the outcome of the law suit for Virgin Media and to some extent News Corp.

Virgin Media lawyer seems to agree that News Corp would settle for an out of court settlement , but maybe with a reduction in the percentage of shares between Virgin Media and News Corp. The difficulty is that without some preliminary analysis, no tangible prediction can be made of how much each side are willing to loose or gain. However if Virgin Media and News Corp agree on a deal out of court, both might be able to settle for sharing the profits and management positions, but it seems from the news and all indicators News Corp wants it all, without any interference.

Organisational approach to decision making or problem solving

So what is the sequence of decisions and uncertain events? Within One month and 2weeks ,Virgin media most come up with a move or decision on what the next step is, defend the case in court, settle it amicably or just let it go for the sake of avoiding a show for the media to profit from which might be against public interest and the company's name. Which one of the decisions is best may depend on whether Virgin Media or News Corp decides to take the court case option, whether or not this is considered, Virgin Media is the first to take the decision. While do not take the court case might be without an immediate cost, going to court case cost initially implies News Corps pays immediate infringement fee of £20,000,000 or perhaps a loss of the case would spell jeopardy.

Fig 2: Decision Tree based on choices to be made ( Expected Utility Model)

The evaluation of the decision node gives options of do not start court case, start court case, settle out of court, proceed with normal bidding, overlooking the evidence, re-opening the case after New Corps won the bid. Decision makers in the process of taking the right decisions have limited choices considering, if the legal action is taken, the probability of winning and cost might be within the two companies , one wins or loses. In the process if Virgin Media loses the court case, it has to pay for damages to New Corps £150,000,000. Another option is to overlook the current media speculation of New Corps lobbying and it's political links to get the bid. Virgin media waits until after the case and with much evidence goes to the court and wins the case.

Virgin Media versus New Corps decision

In order to explain why in practice, Virgin Media and New Corps, instead of other firms. First as a simulation, it bears 70 percent truth as an argument over New Corps bid as been questioned.

The imminent question is what are the possible decision outcomes, considering the Virgin Media and New Corps simulated case? What factors determine the choice between going to court and not going, or settling the alleged pre-lobbying for the 61 percent ownership out of court?

Evaluation of the decision tree

Companies

Cost /Win situation

Cost/Lose Situation

Abandon

Pursue case after N.C wins bid

N.C

61% of BSkyB +damages paid

£120,000,000 deficit

Uncertain who wins or lose

Uncertain who wins or lose after the case

V.M

61% of BSkyB +damages paid

£150,000,000 deficit

Uncertain who wins or lose

Uncertain who wins or lose case

Considering the outcomes which are uncertain, if News Corps due to its political wit and influence gets the best out of the court case, then Virgin Media must pay damages. If reverse is the case, then one can fully say Virgin Media would profit from it. The best option which would suit both of them is to agree to share the 61 percent ownership that normally should go through the bidding process.

What if one party abandons or overlooks going to the court? The fact fed to the public concerning News Corps lobbying would be rendered useless. Then this strictly would be a case of win or lose , the other side is if then the other side retracts to going to court to demonstrate its perceived misgivings during or before the process of bidding, then a legal case leads to a more complex decision.

At the end of all the analysis, settling the issue out of court or ignoring or overlooking the advantage one has over the other might prove worthy.

The case however theoretically reflects elements of rational choice theories; game theory, expected utility theory, while the psychological theories (Schemata theory-arrival of new information helps decision making) can also be applied (Frishammar 2003, p.319; Baron 2000, p.425).

The transaction cost economics perspective can also be applied considering the bounded rationality and opportunistic conduct represented by the case. It is uncertain if either party would have a win-win situation, which if a win-win situation exist, then both companies are better off. The opposite however (Win-Lose situation) aggravates the entire situation, considering the act of lobbying before the bid and other media companies displeasure over the purchase of BSkyB by News Corps (Daellenbach 1994 ; Adair 1997).

Citing one of the cases against News Corps purchase of BSkyB; which is media plurality and unlimited market power, decisions are bound to be at first cognitive which is psychological and then shifts towards rational choice which is depicted by the elements of competitiveness, biases, changes, tradeoffs . Utility theory following an analytical perspective just like the rational elements in decision considers what to gain from certain choices.

Game theory is more logical and based on probabilities, considering the level of uncertainties in the simulated case study, it is useful. So also is transaction cost economics which considers several preferences and choice in the build up to major decisions (Daellenbach 1994).

Success and Failure of the approach

The simulated case study offers firsthand information of what is required from both companies, with Virgin Media making the first move. Despite the uncertainties involved in the case, a quick weighing of choices is relatively closer to the rational and expected utility model (Hoch et al ,2001;Tarter &Hoy 1998; Baron 2000, p.227). Utility represents whatever a particular group or people want to achieve (Baron 2000, p.233-234).

The decision making process is shared between the top managers of Virgin media and the legal arm of the company. The management board sits down and analyses the situation by making use of expected utility model which gives an immediate evaluation of the preferences and controllable variables. However, what theoretical path was taken in making the decision using the expected utility model?

One of the crucial psychological decision making theories is the attribution theory which takes into consideration elements such as schemata, heuristics and bias (Adair 1999; Rayment 2002).

Geva and Mintz (1997,p.73) posits that a schema is a working hypothesis which accounts for some aspect of the environment and probably a concept of the self (self schema), other individuals (person schema) or sequences of events in the environment (scripts) which people adopt when developing scripts for action. Schemata theory reveals that change is proportional to the rate at which new information is obtainable (Daellenbach 1994).

As individuals or groups, are open to information incompatible to their past or existing beliefs, they might incorporate these new information's into their schemata which might produces a gradual shift in the pre-existing values or information (Robinson 2001; Hicks 2004; Robinson 2001).

Heuristics on the other hand consists of rules through which people use in testing their schemata and pave way for the processing of information. In terms of biases, we have cognitive biases, egocentric biases. A bias induces individuals to magnify their own roles as influencing parameters to other people's action (Baron 2000, p.425; Rayment 2002; Wisniewski 2005).

The examination of different decision making theories alongside the analysis of the simulated case of Virgin Media and News Corp produces a crucial finding; which is the complexity and uncertainties that are involved in making decisions at the advanced level. Since the case is one that deals with a disagreement between two companies , the top management and the legal department are the specific personnel's involved. The success attained by using Multi Attribute Utility model ( M.A.U.T) is simply that it gives a more optimistic result in terms of which decision to make by both parties (Baron 2000).

Theoretical submissions are capable in explaining what motivates or influences decision; however the complexity and uncertainties in diverse cases presents a unique step to follow in decision making. Utility theory and rational can be limited to situations when there are preferences and the most crucial element seems to be outcome which a particular decision would produce. The case of Virgin media and New Corps exhibits the elements of uniqueness and complexity in different cases.

The management school perspective to decision making as pioneered by Fayol ,Drucker and others takes a rational , methodical, logical and sequential process which assesses the situation, defining the critical issues, specifying the decision ,making and implementing the decision and monitoring the decisions. Decision making from the strategic management perspective however carries several theoretical strands with the competitive strategy, environment and cultural aspects as important strands. The management strategy decision making aspect thus focuses mainly on operational strategy, competitive strategy, and customer relationship management decision making (Frishammar 2003,p.319;Robinson 2001;Adair 1999).

The most crucial part of the entire analysis is the effects of risks and uncertainties in making decisions. The simulated case reveals that, either of the two companies do not know what the outcome of the court case would lead to; specifically one party wins and the other loses, but then the uncertainty in who would win the case in the court.

The decision that would be better off for both is to keep out of the court or overlook the charges of lobbying prior to the bidding or other charges levelled against News Corps.

Decision making therefore remains a complex task in organizations. The main dilemma involved in decision making at the managerial level because of the uniqueness of different cases. Similarly decision makers' attitude towards risk may change over time depending on the complexity or uniqueness of the cases they encounter (Adair 1999; Robinson 2001).

Adopting the Expected Utility model in this analysis, it paves way for an immediate preference of choices that can be taken while making the decisions. Even if the expected utility model is not prevalent in day to day management decisions, considering the simulated case, the model fits perfectly to situations that demand immediate decisions. If the utility functions derived are never explicitly applied in getting the best decision strategy, the process of assessing such utility function would improve the decision makers' awareness of his or her preference structure which further leads to better and more informed decision making (Baron 2000, p.425).

The failure that is exhibited by the theory and the approach is the inability to hypothesise about the uncertainties or the unknown. That is represented by the unavailability of the probability of both sides winning or losing the court case, probability of settling the case out of the court, and the case for sharing the 61 percent of B2BSky.

Deciding if to pursue the case or not, or let the bid take place and later file for a case or settling the case out of court or let sleeping dogs lie seems to be the vivid options. However, the entire situation would be analysed with Multi Attribute Utility model ( M.A.U.T). The difference of this from Expected Utility model (EU) would be observed in the next section. First, the noticeable difference is that probability is involved in Multi Attribute Utility model; the other crucial fact is that it weighs the alternatives or preferences alongside the importance on a more mathematical perspective (Baron 2000).

Another way of examining this, is the standard utility difference between going to court and not going, which shows that the two options and a comparison between the options takes place. This is more elementary considering that the options are tabled and compared. In sum, the deficiency of Utility theory in this case, seems to be the connectedness and transitivity of the scheme that expected utility measures the extent to which a particular option is geared at attaining certain goals (Hicks 2004;Daellenbach 1994).

If Expected Utility model is insufficient and Multi Attribute Utility model ( M.A.U.T) possesses its own deficiencies (check appendix for detail analysis). Obviously , one other aspect that the Expected Utility model, the decision trees and Multi Attribute Utility model as disclosed in the appendix is that , they failed to show what the win-lose situation would result into for both parties, rather the emphasis is basically on the win-win or settlement of the dispute out of the court scenario. This leads to examining what would be the best way of making a decision and problem solving.

Alternative Problem Solving Model or decision making theories.

Dealing with problems and decision making from a more humane perspective; Bransford and Stein (1993) proposed a problem solving skills that could accommodate other aspects of management theories and learning process. Similar decision making models with acronym ASK SIR L by (Rayment 2001) expresses the same logical and systematic process. The components of the approach by Bransford and Stein (1993) is represented by the acronym IDEAL, where ;

I= Identify problems and opportunities

D= Define goals

E= Explore possible strategies

A= Anticipate outcomes and act

L= Look back and learn

Identify problems and opportunities

The simulated case presented for this paper has rotated in between decision making and problem solving. The first part of the model which is identifying problems and opportunities addresses problem identification and opportunities which might be related to competitive strategies, creative thing which leads to innovation. This can be achieved by applying Ansoff's Growth Strategies (Wood 2007), to decide which area might be suitable for this plan, the decision is made by market forecast. The other alternative here is a consideration of PEST analysis, Internal and external marketing audit (Drummond et al 1999, p.24).

Define Goals

Diverse goals mostly reveal how a particular individual or group comprehends a specific problem. The problem with goals is that the perspective of Mr A on a particular goal differs from Mr B. Defining a goal in the midst of problem or pressure to make certain decisions could be difficult, however defining a goal is thus a crucial step in moving towards a solution to a problem which leads to making decisions.

In practice, people do not examine alternative goals but they move straight to the examination of strategies. In such situation, strategies may well be generated which paves way for the solution to the given problem.

Exploring possible Strategies

This involves reanalyzing goal and evaluation of certain options or strategies that is best suited for specific situations. Succinctly this can be employed to achieve a goal. In many situations, it is easy to examine all the relevant information that is presented. What about uncertainties or a situation where a particular information is not presented? This leads to a prisoner dilemma, in such cases hypothetical and logical thinking comes in, this is where games theory resurfaces. With games theory, moves and countermoves are presented and can be explored for the purpose of attaining a particular goal (Adair 1999; Tarter & Hoy 1998).

From the management theory perspective, Porters Five force model comes into view, which considers of the threat of entry of new competitors, intensity of competitive rivalry , threat of substitute products or services, the bargaining power of consumers or buyers, the bargaining power of suppliers, this all amounts to the application of SWOT analysis in producing competitive strategies or knowing ones competitive advantage (Porter 1979; 2008 ; Kotler 2009). Value chain analysis could be used here also to determine the worth and logistics of a particular product or brand. The simulated case that was used could easily be applied to this model. It might be a more comprehensive and time consuming path to follow, but it offers more information which eventually leads to problem solving and decision making.

Anticipate outcomes and act

After the identification of a specific problem, identification of a goal, selection of a strategy, contingency plans could be drawn up and the strategy implemented. With numerous strategies available, a contingency plan could also be numerous, in case a plan fails, the other plans and strategies could be applied. In most cases, however an active role in testing strategies is important before possible outcomes can be expected or anticipated. The design and testing of a prototype however could assist in anticipating the outcomes of particular strategies in the contingency plan (Proctor 2003; Frishammar 2003; Rayment 2001; Daellenbach 1994).

Looking Back and Learning

The last component of IDEAL model is to analyse and review the effects or impacts of the particular strategy and learn from the experience. When trying to make decisions or solve problems, the emphasis should be mostly on identifying the problem and not an automatic complete solution like the Multi-Attribute theory and Expected Utility theory proposed. The learning process here stems from the first step to the last step which would produce immense information which would help in solving the problem or making a decision.

The simulated case study of Virgin Media and New Corps therefore could be resolved or a decision could be made with the application of IDEAL as an alternative model. The uncertainties, the weight or worth/ impact of each options can be known from the numerous information derived based on different contingency plans and strategies. Issues such as deciding on opting for a court case or opting out, can be examined from a micro and macro environmental analysis, to ensure that the risk of acquiring BSkyB is minimal and profitable.

Conclusion- Alternative models and decision making, problem solving in the future.

The simulated case study (Virgin Media versus News Corps) has successfully revealed that decision making and problem solving is a complex task that most organisations face.

The concept of problem solving, learning , thinking ,decision making and creativity is becoming more prevalent in organisations. The traditional way of making decisions can be regarded as extinct in the business world as diverse variables (dynamism in business environment, organizational structure, legal , political situation) influence decision making. The pressure to remain competitive and gain more profit demands a more complex network of personnel and strategic minded organization.

Approaches such as IDEAL are basically embedded in the organisation, in that they are practices which most organisations or analyst apply. The most important part of models and theory so far is the distinction between models applied in this case study. The Multi-Attribute theory (M.A.U.T) and Expected Utility theory (E.U) can be regarded as lacking the vital information ( such as how competitive is the proposed company for sale, what are the crucial points to consider for a joint ownership, other competitors ,present position of the broadcasting firm in the market) needed to make a decision or solve a problem; they are strictly based on hypothetical or mathematical models ( weights , probabilities, errors) which do not in the real sense convey the strict sense of the case. The IDEAL for instance accommodates several theories and model , and leads directly to gathering vital information that might help in solving the problem or making a decision. Succinctly one can infer that the model possesses a fact finding or analytical perspective based on the exploration of different strategies and plans based on well proven models by other organisations.

The exploration of the simulated case study has generated an example of contemporary situations that different organisations face. One which can be depicted as complex and demanding strategic or logical thinking. At this point, it can be inferred that a grasp of the theoretical aspect of the discourse aids in comprehending the way human behaviour, cognitive or schematic moves are made.

Making decisions or solving problems from my perspective should be approached from different ways; basically an examination of multiple approaches both quantitative and qualitative before arriving at a favourable or most favourable choice.

The module has intensely surveyed the depths and intricacies involved in decision making and problem solving. It has presented a rather analytical and conscious / logical approach to thinking before making decisions. This again reiterates identifying a specific problem at first.

The use of IDEAL model, presents a straight forward means of acquiring information. The problem from the simulated case study is mainly a battle for 61 percent stake in BSkyB which could determine who controls the market. So the main point to consider is the issue of competition; competition from the perspective that two big companies are locked in a battle, either legal or otherwise, they are both striving for control of a broadcasting company that over the years has proved successful. So the motivation behind the politics and backstage dispute is control , but at the same time opting for a legal challenge or not depends on the viability of the research by both companies.

Finally, decision making and problem solving in the future would continually depend on qualitative and quantitative findings as revealed by the models and theories. However, it is certain that conflicts, problems would remain and the more complex they are, the more the extension or formulation of new ways of approaching emerging problems or decision making would surface.

Reference

Adair, J., (1999) Decision Making and Problem Solving, CIPD

Baron, J., (2000)Thinking and Deciding, Cambridge University Press.

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Drummond, G , Ensor, J &Ashford, R.(1999) Strategic Marketing :planning and control; Oxford:Elsevier.

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Geva, N., & Mintz, A. (Eds.). (1997). Decision making on war and peace: The cognitive-rational debate. Boulder, CO: Lynne Rienner Publishers, Inc.

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Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard business Review

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Robinson, I.S., (2001) Problem Solving, Hove Psychology.

Robinson,J. (2010) James Murdoch's call to Vince Cable on day of BSkyB bid , accessed 18th, October 2010, http://www.guardian.co.uk/media/2010/oct/16/james-murdochs-call-vince-cable

Tarter, C.J. & Hoy, W.K., (1998). Towards a contingency theory of decision making. Jnl of Educational Administration, 36, (3), pp212-228.

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