bloomberg l.p. analysis
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DESCRIPTIONBloomberg L.P. Competitive Position Analysis
Date: October 2013 Instructor: Prof. Michael J. Lenox Class name: Foundations of Business Strategy Presented by: Nikolay Zvezdin Subject: Executive Summary: Bloomberg L.P. Competitive Position Analysis Re: Strategic Analysis
Company Overview Type Limited partnership Industry Financial Services, Mass media, Technology Founded October 1, 1981 Founder(s) Michael Bloomberg, Thomas Secunda, Duncan MacMillan, Charles Zegar Headquarters Bloomberg Tower, Midtown Manhattan, New York City, USA Number of locations 192 offices Key people Peter Grauer (Chairman), Dan Doctoroff (President & CEO) Revenue Increase US$ 7.92 billion (2012) Owner(s) Michael Bloomberg (88%) Employees 15,000 (2011) Website www.Bloomberg.com Subsidiaries Bloomberg Media Group, Bloomberg New Energy Finance, Bloomberg News, The Bureau of
National Affairs Inc., Bloomberg Law, Bloomberg Government Brands Bloomberg Television, Bloomberg Terminal, Bloomberg BusinessWeek, Bloomberg Briefs,
Bloomberg Aptitude Test
Introduction Bloomberg L.P. is a financial data analytics and media company that provides financial software tools, data services and news through the Bloomberg Professional service to global firms. The company was founded in 1981 by Michael Bloomberg to bring transparency to the otherwise opaque bond market. Within 10 years, Bloomberg L.P. had more than 10,000 customers for the Bloomberg Professional service, a groundbreaking private network of data, analytics and other financial information. In the same decade, Bloomberg L.P. launched Bloomberg News and opened offices worldwidecurrently more than 190. Today, Bloomberg L.P. is employing its extensive data, news and technologies offer new tools in the fields of education, government, law, energy and sports. The companys commitment to innovation and its passion for getting things right remain strong and are the inspiration behind Bloombergs award-winning products and solutions.
Competitive Position Whole Bloombergs position in the market data, news and financial software markets (Exhibit 1) is dominant. With a 30.82% market share worldwide, Bloomberg L.P. has the only one big competitor that is Thomson Reuters with a 29.48% market share. Other competitors, such as Dow Jones & Company, Inc., Interactive Data Corporation, S&P Capital IQ, FactSet and other small companies hold 39.51% market share for all. That makes Bloomberg L.P. and Thomson Reuters almost the only big companies in the industry. The Bloomberg Professional service, also known as the Bloomberg terminal, is a computer system that provides professionals in finance and other industries access to financial news and analytics. The system enables users to monitor and analyse financial market data in real time and place trades on the electronic trading platform.
The breakdown of Bloomberg terminal users (Exhibit 2) is: 22% Analyst, 20% Trader, 16% Sales, 14% Portfolio Manager, 9% Risk Management Analyst, 19% Others. During the past decade, Bloomberg L.P. developed and introduced technological advances in key products and services such as email and instant messaging. These have made the Bloomberg Professional service the leading choice of more than 315,150 business and financial professionals globally. However competitors, more specifically Thomson Reuters is trying to copy Bloombergs success. Following the Bloomberg L.P.s announce of Bloomberg Terminal, Thomson Reuters announced its EIKON system. However EIKON has failed, that made Bloomberg Professional Services market share (Exhibit 3 and Exhibit 4) of 57%, comparing to Thomson Reuterss 34%. Though, Bloombergs revenue for 2012 (Exhibit 5) was $ 7.920 billion compared to Thomson Reuterss $ 12.890 billion, taking into account that Bloomberg L.P. has a bigger market share comparing to Thomson Reuters, we might conclude that Bloombergs team operating the money more effectively, rather than its competitors. Moreover, during the past decade Bloomberg L.P. had shown sustainable revenue generating (Exhibit 6.1), and no losses at all, comparing to Thomson Reuters (Exhibit 6.2), that sometimes had shown losses and high jumps in revenue, after that drops in revenue again. Moreover, before the financial crisis of 2008, Thomson Reuters had shown a huge growth in revenues that is +81%, however after the crisis it shown drop in revenues of -3%. While Bloomberg L.P. had a growth of revenues before crisis of +13.79%, and after crisis it still made revenue and did not lose anything, that is +3.17%. So as we may observe, Bloomberg L.P. is more stable company managing its risks more effectively. Additionally, we may see that the average growth of revenues for Bloomberg L.P. and for Thomson Reuters is 10.04% and 5.75% respectively. Within the last years, Bloomberg L.P. launched the Bloomberg Institute the educational branch of Bloomberg L.P. The Institute has leveraged Bloombergs expertise in financial information and contacts in the finance industry to develop a test aimed at helping students and recent alumni connect with financial employers worldwide. The Bloomberg Aptitude Test (BAT) is currently offered on campus by more than 1,028 top universities; to date, the BAT has been taken by more than 100,000 students. That shows that Bloomberg L.P. has not stuck in only one industry, but it is growing in all the others. However the test was free of charge all these years, but soon it will be priced and Bloomberg L.P. will start generating more revenue. None of Bloombergs competitors have shown such grow in other industries.
Changing Industry The main products of the industry are: Data production, Analytics, Research, News, Regulatory data support. And the main industry activities are: providing financial data and research, providing fixed income market data, providing balance sheet data, providing regulatory compliance support, providing financial data and research, providing fixed income market data, providing balance sheet data, providing regulatory compliance support. And according to IRNs latest report - The Global Financial Data Market that looks at the financial data and allied software industry defined as market data, reference data, credit ratings and associated analytical and allied software, in total, a worldwide market of $ 23.2 billion, $ 6.0 billion within the US. Thomson Reuters is the leader in its share of total markets revenue (Exhibit 7), however it is still losing positions in its global markets share to Bloomberg L.P. and as we observed before, Thomson Reuters is highly unstable. The financial data market remained largely unchanged in 2008 compared with 2007 but experienced a sharp decline in sales of 5.5% in 2009. However, nowadays most of the key players in the industry has covered its losses during the crisis, and even gained more profits and revenues. In response to the crisis, many data vendors and suppliers tried to improve the value for money of their offers. These moves have ranged from being more flexible when negotiating contracts e.g. reducing normally fixed annual fees for firms that have lost headcount to offering more data over a common infrastructure. Some suppliers are also trying as far as possible to price data on a bespoke basis. The top players of the industry have approached its own methods. While Bloomberg L.P. has been more focusing on improving its data and software quality, as well as trying to combine the financial industry with educational, Thomson Reuters has applied its approach of acquiring its suppliers, that is known as vertical integration. However as we have seen, the first approach has been more successful. After the crisis hit the whole financial world, Bloomberg L.P. has acquired only 3 companies (Exhibit 8.1) that were the biggest companies in their industry. While Thomson Reuters acquired 24 different size companies (Exhibit 8.2). We can interpret that as a signal that Thomson Reuters either does not has its own recourses and possibilities to growth, either it want to growth as much as possible, even without taking into account its falling revenues of -3% (2009) and -7% (2012).
Conclusion The market data, analysis and financial software industry is highly competitive, and almost owned by two major players that are Bloomberg L.P. and Thomson Reuters. Other companies are small and medium players that cannot compete with the industry major companies. All the new entrants of the industry (Exhibit 9) will face a huge luck of market power, luck of recourses that has major players, and of course luck of customers. That is why there almost no possibility to enter the market. Moreover, Bloomberg L.P. and Thomson Reuters are already well known and recognised to all customers, and they have positioned themselves as the only valuable financial data and software providers, so it will be hard to attract these companies customers. The industry of market data, analysis and financial software requires a big capital, that most of entrants cannot afford. Most of the distribution channels of Bloomberg L.P. and Thomson Reuters are owned by themselves, and have a high quality and very hard to compete with. Additionally, most of Bloombergs and Reuterss customers are big companies, such as banks, government organizations, funds, and others, that require only the best products, and they most probably will not by loyal with new entrants of the market, since they have not shown such results yet, as Bloomberg L.P. and Thomson Reuters. The industry itself is highly profitable, however even the big players such as Thomson Reuters lose money sometimes. That is why the entrance to the industry requires not only big capital, but also big experience, and great team of managers. Due to this most of potential entrants will be afraid of such requirements and will not enter the industry. The only possible substitute of Bloomberg Terminal for big companies is only Thomso