c




This is a paper work for the MBA course of the University of Wales Lampeter, into
the Strategic Management subject.

In this work the researcher will look into the company Playboy Enterprises, Inc.
(PLA) and its strategies and market position. To identify what the company are doing a few
academic tool are going to be utilized and the data for the research will be gather from the
market and will be almost the same that the common shareholders have access. The tools
present in this work are listed below:

á Industry Life-Cycle
á Market Segmentation
á Porter Five Forces
á BCG Matrix
á Critical Success Factor Analysis
á Value Chain
á PESTESL Analysis
á TWOS Analysis

After these tools a conclusion of what was found and a few recommendations were
made.
è





c. EXECUTIVE SUMMARY ................................ ................................ ............................... c
. TABLE OF CONTENTS ................................ ................................ ................................ .. 

. INTRODUCTION ................................ ................................ ................................ ............

. LIMITATIONS ................................ ................................ ................................ .................

. ANALYSIS OF THE COMPANY ................................ ................................ .................... 
.c External ................................ ................................ ................................ ....................... 
.c.c Industry Life-Cycle ................................ ................................ ............................... 
.c. Market Segmentation ................................ ................................ ............................ 
.c.
Porter Five Forces Analysis................................ ................................ ................... 
.c. BCG Matrix ................................ ................................ ................................ .......... 7
. Internal ................................ ................................ ................................ ........................ 8
. .c Critical Success Factor Analysis................................ ................................ ............ 8
. . Value Chain ................................ ................................ ................................ .......... 9
6. TOWS ANALYSIS................................ ................................ ................................ ........... 9
7. CONCLUSIONS AND RECOMMENDATIONS ................................ ........................... c
7. REFERENCES ................................ ................................ ................................ ............... c 
8. BIBLIOGRAPHY ................................ ................................ ................................ ........... c 
9. APPENDIX ................................ ................................ ................................ .................... c 
9.c PESTEL Analysis ................................ ................................ ................................ ...... c 
9.c.c Political Factors ................................ ................................ ................................ .. c 
9.c. Economic Factors................................ ................................ ................................ c

9.c.
Social Factors................................ ................................ ................................ ...... c

9.c. Technological Factors ................................ ................................ ......................... c

9.c. Environmental Factors ................................ ................................ ........................ c

9.c.6 Legal Factors ................................ ................................ ................................ ...... c

9. Classification of segmentation basis ................................ ................................ .......... c
9.
BCG FRAME ................................ ................................ ................................ ............ c
9. Value Chain Frame ................................ ................................ ................................ .... c
9. Financial Statements................................ ................................ ................................ .. c
c. Table of Figures ................................ ................................ ................................ ............ c9
D


Playboy Enterprises, Inc. was founded in c9
by Hugh Hefner at Chicago, Illinois
USA. Its first publication had Marilyn Monroe at its centrefold, selling approximately .
copies. Playboy nowadays is a global media and lifestyle company, not only selling
magazines but having their content at television, websites, mobile phones and radio.

The competition for the company started at the 7s with new magazines like
Penthouse and Gallery, and a few more years ahead they had to compete against adult movies
as well.

Now, Playboy do not have a limited numbers of competitors, they have to face new
entrants every day, thanks to the internet, and they also need to manage their brand and
always keep innovating in the content of all of their products.

This report is going to analyze the internal and external aspects of the company,
identifying their strategies and also analysing the flow of their stocks against difficult
decisions or difficult times. The key questions that this report will look to respond is:

á How each of their products (Magazine, video, website and radio) are
positioned at the market, and how would be possible to
improve/maintain their position.
á Can we apply strategy theories at their past/future strategies.
á Witch areas of the company and with what they contribute to the
competitive advantage
á Identify the strategic choices and the difficulties between them.

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This paper will focus on the Playboy Enterprises, Inc. (PLA), the original American
company, with shares available in Wall Street. The researcher tried as hard as possible to find
de accurate data and to provide the most neutral analysis of each collected data, but even with
Playboy Enterprises, Inc. having an open capital it is impossible to have access to all of their
data and positioning strategy. It is possible to say that the data collected and analysed is
almost the same as their common share holders have.

Another limitation to this report is the time, cc weeks to analyse a huge company
strategy is simply not enough, and the researchers time was not totally dedicated to this
MBA work. Been a study report the budged is limited too, making harder to find appropriate
data and analyse tools. And the final limitation is the length of the work that is limited by
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This is a tool is an essential element of market analysis in industrialized segments.

Since we must consider the customer needs and recognize the heterogeneity of those needs,
divide the market and focus the activity has shown itself the best option to optimize the use of
resources.

Wedel and Kamakura ( 
), classifies the bases of market segmentation in two
forms: Observable and Unobservable and this two classifications has another two divisions:
General and Product-specific, their characteristics are shown in the table c.

Knowing that PLA offers adult content they must focus a little more attention to the
unobservable basis, because sometimes something present in their advertisings or covers
might be offensive for other adults or groups. Basically the public target of PLA is male, over
c8 years old, with enough money to buy their products and services. This segment is a huge
part of the USA population and they receive all kind of advertising from all of their
competitors.

In order to keep a good market share the company is always innovating on their
products content and researching new ways to approach the public, like Facebook and
Twitter.

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This framework has proven itself useful among the years, the main point of this tool is
to analyse the forces that the company are submitted for and if possible create barriers to
minimize the force exercised on the company.

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Observing the company it is possible to say that they have many suppliers and that
sometimes their power of bargain can affect the launch of a new product or service. For
instance the girls that appear in the magazines and videos, if they are top models known all
around the world, makes difficult for the company to bargain with them and get a good price
for their ³services´, in many cases the value of this services are overpriced but in order to
maintain a good quality on its products the company must pay the price.

‰
     

Nowadays with the advent of internet more and more unknown companies have
internet sites with adult content similar to the ones offered by PLA. Therefore to fight against
them the company is creating private content in the website, for registered members and
subscribers and always innovating the style and way that the girls are shown.

‰
   
   

The Buyers are the principal force in the company and therefore they have the most
influence over the company, PLA always try to keep in touch with its clients via forms or
email, trying to understand their need and offering new options of services and girls.
‰
   
   

The substitute products and services varies and can be found in almost everywhere in
the world and the company must maintain a good image to not suffer turnover on their
clients. Things like live shows, pay-per-view and other adult contents might be classified as
substitute.

‰
 ‰ ! " #! 

The Rivalry is tough. The same services are offered, the same products and almost the
same price for them. How can the company be successful in a market like this? It is not
simple, but differentiation on the content inside the magazine, new and popular girls,
promotions and a good market strategy, are the key to gain advantage over competitors.

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The Boston Matrix is used to identify visually, where the products of the company are
situated in the market and how the market that they are in is.

The BGC frame presents in this papers appendix represents the products of PLA and
where they are situated in the market, a separated analyze will be done bellow.

‰

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This is the main product of the company, been in the market for over  years made
possible for the company to create a good market share and make the brand known around
the world, with accessible prices and good content the magazine not only proportionate
beautiful women but have interesting interviews, good reports and advertising

‰
 & '(!

This is another great product offered by the company, with quality movies starring
stunning woman, offered in tapes and on cable/satellite TV, its proportioned a good income
for the company, but since there are too many competitors and substitutes for this product, it
is hard to maintain a good market share and it is also possible to say that the market are
saturated.


‰
  
 This is not a new feature, but a good one to maintain contact with the public; in the
radio program the public have direct contact with Hugh Hefner, broadcasts direct from the
Playboy Mansion, interview with the stars and other adult features. But the market share hold
by this feature is not too big and this is already a matured market, only hardcore fans and
users will be tuned most of the time, but this is a differential offered by the company and is
showing itself useful to interact with the public and hear their opinion.

‰
 )   

Internet is a magnificent invention and the company is using it to advertising and to

sell more products, although the space for growth is huge, the rivalry existing on it is too big
to hold a good share of the market

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The first person to define the concept of critical success factor was Rochart, in c979;
he defined these success factors as a number of critical areas, where the success achieved by
them would enhance the companys performance and create a sustainable competitive
advantage.

The company works with  different products and to be successful as they are
nowadays they need to offer good products and have a fast response to changes in the
environment, bellow will be listed the factors that the researcher, found to be essential:

‰ 

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The company, over the years created a way to be known around the world without the
excessive use of television advertising and it is almost impossible to find a young man in the
USA that do not know about PLA. The adaptation is also important in the companys market,
operating in many countries the way to advertise change and what and when to show in the
magazine/video changes as well.

‰ 
  

This is where the company makes money, the rent of its space for advertising its
expensive, but this is only possible because of the range of people that they have in their
products and services. Renting a page in the magazine, or advertising some brand in the
pictures or videos, is a strategic way to earn money other then sells.

‰ 
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 Playboy brand is unique and it is not possible to measure the value of the brand. The
intangible assets and the greatness surrounding the mansion only add value to the brand and
to the girls that appear on its cover. More than this, the way of sell the brand, as a intelligent,
sophisticated adult-entertainment, makes the brand so good and well managed, for being able
to do all this.

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With a value chain analysis it is possible to find the core and distinctive competencies
of the company and the tangible/intangible resources. The figure
in the appendix is the
possible Value Chain of PLA.

Analysing the Frame  it is possible to identify the support activities such as HR and
Technology use, looking for the PLA is possible to identify that these two support activities
are of extreme importance for the company, because the HR hold the secret of the company:
its girls; and the other one is responsible of the final touches in the pictures/films, for them to
go to the public in perfect form. It is not possible to measure the impact of these two great
forces in the sales or market share, but without a doubt they are important for the company.

For the primary activities all of them must be in synchrony but the more important are
the Marketing and Sales followed by Logistic. The first one is the one that makes the brand
known, that create the need in the client to buy the product as the second delivers it. It is of
extreme importance that these areas know where they are and where they want to be in order
to work together for the benefit of the company.

-
.
 

This tool is a modification of the SWOT analysis with the intention of creating strategies to
overcome the weakness and make use of the opportunities.
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á Value Chain
á PESTESL Analysis
á TWOS Analysis

The First four tools had the intention to analyse the external of the company, and how
the company responses to this surroundings. It is possible to see that the market witch PLA
places its products are in a mature stage, with at least three big players and tons of substitutes,
and in order to define the objectives a look into the customer needs are essential. Utilizing the
Market Segmentation Theory was possible to define who the target markets for the company
products are and with this the company are capable of doing specifics advertising and place
the product correctly in the market. Following the flow of the work the Porter Five Forces
diagram showed us some barriers existent between the company and the forces surrounding
it, were found out that the principal force for the success of the company are the ³human
supplier´ that are the girls used in the PLAs products. This is what make possible for the
company to create competitive advantage and maintain it.

The BCG Matrix made possible to realize where the companys products are located
in the mature sector and what should the company expect for each one of them, the Playboys
magazine is the principal product offered by the company and still the primary source of
capital for the company, either by sales or by renting space for advertising and the most non
lucrative, but with strategic importance is the radio program that makes possible for the
company to communicate with the customer, understand their needs and do something to
correspond it. The PESTEL analysis (See Appendix) showed that the company have enough
influence in the most important factors and should not focus efforts trying to change any.

After these analyses the focus were changed to the insides of the company, with two
other tools. So it was possible to see what makes the company so successful. First of them
were the Brand Management and the Rent of Space that they do in the magazine and movies.
The Brand Management is an extremely important factor to the company success, the Logo,
the mystic around the Playboys Mansion make the companys brand the most expansive and
important intangible asset, making possible recruit famous girls and partners for its works.
And the Space that is rent inside its products makes an important source of revenue for the
company to maintain its position in the market.

To make the company run, two support activities were identified, HR and Technology
Use, these areas together, make the magic of PLA, with girls and special effects, the photos
and videos have an excellent final result with aggegad value and are sold all around the
world. But in order to support this, two primary activities must be synchronized, Marketing
and Logistic, these two areas are the beating heart of the company, making the products
reach longer and longer.

Although the company have a good management, they are not alone in the market
place and they should be worried about competitors, substitutes and some internal affairs. For
instance the internet and the 8 crises made the company lost a significant part of its
market share and consequently the shares prices dropped, to regain a superior position in the
market place a good strategy, and synergy with the customer is essential, and they have the
tool for this work, the PLAs website and Radio program. There, it is possible to add features
to interact more and more with the public, to listen their opinions e to analyze the
repercussion of the companys acts, and more, it would be possible to even recruit girls or
create contests to increase the visibility of the brand.

To conclude, the company has been around for over  years and they are doing a
good job managing their products and services, but to maintain a good position in the market
new strategies must appear and the actual owner, must realize that he is not living in the s
anymore, it is a globalized word, and the company have shareholders to respond.

·


nd
Market Segmentation Conceptual and Methodological Foundations edition Michel Wedel,
Wagner Kamakura

0
+)

http://tutor u.net/business/strategy/what_is_strategy.htm

Michel Wedel, Wagner Kamakura, Market Segmentation Conceptual and Methodological

Foundations nd edition

Morgan, G., Images of Organizations, London: Stage Publications, 6

Porter, M. E., Competitive Advantage, Boston: Harvard Business Review Book c998

Rochart, J.F. (c979), ``Chief executives define their own data needs'', Harvard Business
Review, Vol. 7 No. , March-April, pp. 8c-9 .

1
))

1 c
) 
 

The PESTEL analysis is a managerial tool to strategic analyse the macro-environment
that surrounds the company. The point in utilizing this tool at the companys external
environment is that you may be able to anticipate the changes that might occur at its external
environment, and since the company cannot control the changes in these scenarios, foreseeing
them can give a temporary competitive advantage for the company.

1 c c
)( 
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These factors are related to the government policies in the country, state, region, that
the company have business.
 The USA is a free country ruled by the capitalism, there are no signs that this might
change in the future, and the rules for the PLA operation are clearer than ever so this is not a
huge threat for the company.

1 c è
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Are those that affect the company on its rates, decision to give dividends or not,
exchange rates, in resume any kind of financial factor that may interfere at the business.

PLA is a open capital company so every big change may affect its business and share
holders, after the 8 economic crisis the company lost too many costumers and with new
approaches and products are trying to regain the position, so it is possible to say that the
economic factors are important for the company and its directors must pay attention to any
sign of change.

1 c D
( 
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Any change in the social trends can impact on the demand of the companys product
and the availability and willingness of individuals to work at the company.

The products and services offered by PLA are not essential so they must create the
need in the costumers, this factor is the one the make the company run, a good acceptation by
the society is essential for the success of the company.

1 c r
 , (( 
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New technologies can create new products or change the way of making old products.
These new technologies can benefit consumers and the company as well.

This factor is important for PLA, because with technology they are capable of editing
pictures/films, create new advertise; and develop new features for the website.

1 c %
 * ( ' 
 (

Environmental factors are related to changes on the weather and climate. How can
these changes affect the company and how to overcome them.

This factor does not represent a big threat for the company, only natural disasters such
as hurricanes and inundations should worry the company.

1 c -
 
 (

These factors are related to the legal environment in which firms operate, for example
the laws that are applied in the company, and the market that the company operate.
 The laws for the sector witch PLA works are solids and the company holds a good
influence in the decisions made in this sector because is one of the biggest players.

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Cultural, geographic, User status, usage frequency,
 * 
demographic, and social- store loyalty and patronage,
economic variables situations
Psychographic values, Psychographics benefits,
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personality and life-style perceptions, elasticities
attributes, preferences, intention
Source: Wedel and Kamakura ( 
)

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* $ ,96
$ 6 ,c9c
Costs and expenses
Cost of sales (
,8) (7,c8)
Selling and administrative expenses (cc,987) (cc,
7 )
Restructuring expense (c,87) (9,96)
Total costs and expenses (7,c ) (67,68)
Operating loss (c,c9) (,7)
Nonoperating income (expense)
Investment income 6 699
Interest expense ( ,c9 ) ( ,c7)
Amortization of deferred financing fees (c6) (c6)
Other, net (9 8) (67)
Total nonoperating expense (
, 78) ( ,c7)
Loss before income taxes (,
7) (7,6)
Income tax expense (967) (c,c96)
 

( $ (,) $ (8,76)

Other comprehensive income

Unrealized gain on marketable securities -

Foreign currency translation gain  67
Total other comprehensive income  6c
('3 ,    
*
( $ (,9) $ (8,c)

  

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Basic and diluted

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 $ (.c6) $ (. 6)

Source: uarterly report pursuant to sections c
or c(d)

 
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c 9
  

* $ c8,ccc $ c
,8 
Costs and expenses
Cost of sales (8c,9) (97,6c)
Selling and administrative expenses (
,8) (
,9c)
Restructuring expense ( , 8) (c , 7)
Impairment charges (7) (,c8)
Total costs and expenses (c7, 8) (c
9,
c
)
Operating income (loss) 9
(c,89)
Nonoperating income (expense)
Investment income cc 7

Interest expense (,
6 ) (,
)
Amortization of deferred financing fees (
8) (
89)
Other, net (987) (6)
Total nonoperating expense (,666) (,
)
Loss before income taxes (,76
) ( , )
Income tax expense (c,6
) ( ,
98)
  

( $ (6,
66) $ ( , )

Other comprehensive income (loss)

Unrealized loss on marketable securities - (
)
Foreign currency translation gain 96  
Total other comprehensive income 96
97
('3 ,    
*
( $ (,87) $ ( , )

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(
(''(
,
( 

. ,
*

Basic and diluted

,86

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 $ (.c9) $ (.67)

Source: uarterly report pursuant to sections c
or c(d)

 
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(Unaudited)
June
, Dec.
c,
c 9
 
Cash and cash equivalents $ c,76 $ ,69
Receivables, net of allowance for doubtful accounts of $,7  and $
,8
, respectively
,
c,9
Receivables from related parties c,7 ,897
Inventories ,9c
,9c
Deferred tax asset c, 6 c,87
Prepaid expenses and other current assets ,
6c ,8
Total current assets 66,7 69,89
Property and equipment, net c6,

c8,
8
Programming costs, net ,9 7,c6
Trademarks, net ,c 
,96
Distribution agreements, net of accumulated amortization of $7, and $6,7c, respectively cc,  cc,c

Deferred tax asset
 -
Other noncurrent assets ,876 ,7
Total assets $ c88,976 $ c96,8

   

Acquisition liabilities $ 68 $ ,8
Accounts payable ,c 9 c,c
8
Accrued salaries, wages and employee benefits 8,7  c,c

Deferred revenues 9,67 7,c7
Other current liabilities and accrued expenses c7,96 c7,c9
Total current liabilities 79,c6 8,999
Financing obligations c6,
8 c,c 8
Acquisition liabilities  7

Deferred tax liability 8, c6 7,76
Other noncurrent liabilities ,7 ,9
Total liabilities c6,
c c9,c 8

    

, ,( 5

Common stock, $.c par value
Class A voting ± 7,, shares authorized; ,86,c issued 9 9
Class B nonvoting ± 7,, shares authorized; 9,c6 ,79 and 9,c,

issued,
respectively 9c 89
Capital in excess of par value 6,988 6,
79
Accumulated deficit ( 8c,

) ( 7,96)
 Treasury stock, at cost ±
8c,97c shares (,) (,)
Accumulated other comprehensive loss ( ,
) (
,9)
Total shareholders deficit ( 7,) ( , 96)
Total liabilities and shareholders deficit $ c88,976 $ c96,8


Source: uarterly report pursuant to sections c
or c(d)
 
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.

c 9
   
 ,
(6
('
(3 ! " #$ %" " !

*
Net loss $ (6,
66) $ ( , )
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation of property and equipment ,
8 ,c
Amortization of intangible assets 778 897
Amortization of investments in entertainment programming c
,666 c, 
Amortization of deferred financing fees
8
89
Stock-based compensation 7 9
76
Noncash interest expense ,
c ,cc
Impairment charges 7 ,c8
Deferred income taxes

6 86c
Payments of deferred compensation plan - (,c88)
Net change in operating assets and liabilities ( ,9) cc,7
Investments in entertainment programming (c,98
) (c
,
c)
Other, net c, 9
(9c)
Net cash provided by (used for) operating activities ,87 (c,8c6)
   
 ,
(6
('
* # !" #$ %" " !

*
Purchases of investments - (9)
Proceeds from sales of investments - 6,78
Additions to property and equipment (c, cc) (c,769)
Other, net
-
Net cash provided by (used for) investing activities (c, 8) ,89
   
 ,
(6
('
 ##% #$ %" " !

*
Payments of deferred financing fees - (c7)
Payments of acquisition liabilities (,8) ( ,8)
Proceeds from stock-based compensation 68 c
Net cash used for financing activities (,7
) ( ,9c6)
Effect of exchange rate changes on cash and cash equivalents ( 7) 66
Net increase (decrease) in cash and cash equivalents (
,9
) 769
Cash and cash equivalents at beginning of period ,69 ,c9
Cash and cash equivalents at end of period $ c,76 $ ,96c

&
Source: uarterly report pursuant to sections c
or c(d)

c7
 
(


Figure c: Industry Life-Cycle ................................ ................................ ................................ 

Figure : Porter Five Forces ................................ ................................ ................................ .. 6
Figure
: BCG Matrix ................................ ................................ ................................ ......... c
Figure : Value Chain ................................ ................................ ................................ ......... c

Table c: Classification of Segmentation Basis ................................ ................................ ..... c

Table : PLAYBOY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS ................................ .............................. c6
Table
: PLAYBOY ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS ................................ .............................. c6
Table : PLAYBOY ENTERPRISES, INC.CONSOLIDATED BALANCE SHEETS ........ c7
Table : PLAYBOY ENTERPRISES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS ................................ ................................ ................... c9