Strategy Session at MSLO

Introduction

Martha Stewart Living Omnimedia (MSLO) has been a successful household name since it incorporation, with interest in publishing, television and radio broadcasting, merchandising and internet ventures. Its driving force has been built on the idea of better living through design.[1] The company has been able to transform various aspects of our life into successful ventures, such as, personal organization and meal planning in creative business opportunities.

Though successful, the company has been through various challenges but none has been notable like the imprisonment of its CEO, Martha Stewart, in 2004 for insider trading and her resignation in an effort to save her company’s stock price that were performing poorly following the news of trial and conviction.[2] Following these developments, MSLO formulated and implemented new strategies to contain the situation and help to stabilize the stock price and market share.

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Stock price history

The company’s stock is currently trading at $3.22 per share as at August 11, 2011, trading a volume of 341,593 shares and with an improvement of 5.57% from the previous day’s trading.[3] The company’s highest stock price was $37.40 per share in February 24, 2005, trading a volume of 3,604,300 shares prior to release of Martha from jail, and the company’s lowest stock price was $1.61 per share trading a volume of 190,400 shares following the its being hit by financial crisis.

The impact of Martha Stewart’s conviction

Following conviction of Martha Stewart by mid June 2002, the company’s stock price was almost half of what it was trading at the end of 2001, with Martha choosing to remain silent about the allegations only professing her innocence. In the next span of about two years, while the saga continued, the company was unable to recover its stock price, as it was at the end of 2001 mark. This conviction made a huge toll on the company’s profitability and cash flow, leading to halving of the 2002 third quarter projections.[4]

These developments made the shareholders and other stakeholders to loss confidence in the company, something that further aggravated the situation of the company. By January 2003, many advertising customers such as Chrysler had withdrawn their contracts, with the company registering the first quarterly loss of $2 million and the Martha Stewart Living Magazine registering 31% drop in revenues.[5]

With the shareholders feeling the effect of plummeting stock price, some responded by disposing off the shares while others were deeply agitated that they took legal action against the company. For instance, Howard Rosen, an MSLO shareholder, in August 22, 2002 sued Martha and her top business associates for selling stock in MSLO before the investigation of her ImClone sale became public.[6]

Corporate strategies that MSLO pursued in the period following Ms. Stewart’s conviction to improve the public’s perception of Ms. Stewart and her company, MSLO

First, the company ensured that Martha Stewart resigned as the COE and relinquished any duties relating to running of the company. Secondly, the company embarked on a mission to build secondary personalities and branded media properties to minimize reliance on one person for branding.

Additionally, the company advised Martha to remain silent during the whole ordeal to avoid further negative publicity. Lastly, the company embarked on product dilution process, shifting focus to health categories and other acquisitions such as Body & Soul Magazine, and the Self Healing Newsletter promoted by Dr. Andrew Weil.[7]

Based on the company’s stock price, I think these strategies were effective only for a short while, because the company’s stock price improved only for a short following release of Stewart, while before remaining low and even achieving the lowest price in 2009. I would advise Stewart, at the time of the saga, to open up as this might instill confidence in shareholders, though risky, since remaining silent sometimes could be interpreted as ignorance or guilt.

Bibliography

AIGA. Martha Stewart Living Omnimedia: 2007 AIGA Corporate Leadership Award. 2007. http://www.library.arizona.edu/search/reference/citation-cms.html Accessed August 12, 2011.

Anon. “Martha Stewart Omnimedia’s Next Move.” The Magazine for Magazine Management, vol. 33, issue 20, October 2004.

Anon. Martha Stewart Living Omnimedia Inc. (MSO): Historical Prices, 2010. http://www.hotstocked.com/companies/m/martha-stewart-living-omnimedia-inc-MSO-historical-prices-58821.html Accessed August 12, 2011.

CNN. “Timeline: Martha Stewart.” CNN/Money. N.d. http://money.cnn.com/pf/features/popups/martha_timeline/index.html Accessed August 12, 2011.

RI Cases. “RI Case Studies: Martha Stewart.” Reputation Institute. 2011. http://www.reputationinstitute.com/case_studies/martha_stewart Accessed August 12, 2011.

Westby, Arianne and Moulton, Mary. Martha Stewart: Allegations of Insider Trading. 2002. www.awpagesociety.com/images/uploads/Martha_Stewart_Case.ppt Accessed August 12, 2011.

AIGA. Martha Stewart Living Omnimedia: 2007 AIGA Corporate Leadership Award, 2007,

http://www.library.arizona.edu/search/reference/citation-cms.html Accessed August 12, 2011

CNN. ‘’Timeline: Martha Stewart.’’ CNN/Money, N.d,http://money.cnn.com/pf/features/popups/martha_timeline/index.html Accessed August 12, 2011
Anon. Martha Stewart Living Omnimedia Inc. (MSO): Historical Prices, 2010,

http://www.hotstocked.com/companies/m/martha-stewart-living-omnimedia-inc-MSO-historical-prices-58821.html Accessed August 12, 2011

RI Cases. RI Case Studies: Martha Stewart, Reputation Institute. 2011,

http://www.reputationinstitute.com/case_studies/martha_stewart Accessed August 12, 2011

ibid
Arianne Westby and Mary Moulton, Martha Stewart: Allegations of Insider Trading, 2002, www.awpagesociety.com/images/uploads/Martha_Stewart_Case.ppt Accessed August 12, 2011.
Anon. Martha Stewart Omnimedia’s Next Move. The Magazine for Magazine Management, vol. 33, issue 20, (October 2004): 15.

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