With the current state of WRSX, there is a need for the Board of Directors to relook into the strategic management of the company; ensuring strategy applied is relevant, creating value to the company and its stakeholders. WRSX need to function as a complete integrated entity, different business units operate and contribute to the success of WRSX. WRSX strategy needs to be accepted by all stakeholders, preventing conflict, allowing alignment across all levels in the business.
Wants to turn a mid-size player into a top 20 agency group with global presence and in turn increase ROI for shareholders.
Making the clients successful through differentiating and strengthening their brands by creating advertising and using a range of market related activities.
Through the mergers and acquisitions, the structure ensures independence of the various business units with a great deal of autonomy that subsequently contributes to the effectiveness of the service offered.
Looking at the growth strategies to increase market share:
either through expanding market share in existing market
Expand range of products and services
Beating competitors through expanding geographically
Targeting new industry sectors
Strategic Capabilities (Strength and Weakness)
Taking into consideration WRSX’s scope of activities and resource commitment, WRSX should stand among the medium-to-large scale advertising and marketing services companies. The market segments that WRSX serve are the medium-to-large clients companies from the following sectors: auto automotive and transport, health and pharmaceuticals, telecoms, personal care, beauty and fragrances, public sector and charities industries.
WRSX has managed under them a range of highly specialised business units i.e. media buying, public relations, research and insight, direct marketing, branding, film production, sports marketing, brand identity, digital media. This is an extensive breath and range of service provided from a medium-large advertising group.
Among them, their research and insight unit continually addresses any changes in the industry, making sure WRSX doesn’t lag behind its competitors. And information is passed on to the production teams so to create effective advertisement to targeted market. These production teams are highly creatively thus value-adding to the advertisement and increase the effectiveness.
All the talk on creativity and innovation wouldn’t have been possible without leveraging on the leadership behind it. Located in each geographic office are creative professionals with good track record before the merger on the area of creativity. Furthermore, each business units enjoyed a great deal of autonomy brought together by the merger. Therefore, the leaders behind WRSX are the unique resources here.
These are considered dynamic resources and capabilities as they are constantly evolving with the dynamics of the industry. This enables WRSX to renew and recreate its strategies to tackle the changes and new development in the market.
Critical Success Factors
Like any company striving in this highly competitive market, WRSX possess a few critical success factors which are further attested by the results from the ADCOM Benchmark Survey. WRSX has a good track record of producing creativity and innovative works for its clients and it has a very capable market research business unit, understanding the market segments thoroughly, accurately targeting the end customers of the advertisements.
These are two factors that many client companies valued as it can simply underline the effectiveness of any advertising company. WRSX’s client companies want innovation and creativity in the various marketing tools as only through such differentiation can the client companies outshines its competition as well as for WRSX.
Use VRINE framework
Diagnosing WRSX’s strategic capability > Activity mapping, Value chain analysis.
bases for WRSX achieving competitive advantage: Operations, Human resource management, Service
From the diagram above, we can see that WRSX’s value chain consist of a firm infrastructure in the form of Office Central Services where it will take charge off all, HR, Finance and administrative issues. Following which are the rest of the supportive activities.
The Market Research and Insight units will help conduct market research which gives insight into consumer and market development. They are then strategically interpreted and adapted into the advertisement which adds value to client’s business through the improved advertisements.
The Public Relations units will help flow information to the general consumers through events like conferences, acting as another channel to advertising. They are also involved in building rapport within the company with the employees and lobbying for and against legislative decision that affects the clients and WRSX.
The Business Development is involved in the organic growth of the company, making sure that WRSX is always moving forward and reacted to changes in the industry and take opportunities when one comes about along the way. They are involved with decisions concerning acquisition, strategic alliances and even divestment.
WRSX has a wide breath and range of services it provides. They are mainly the following:
Branding and Identity unit are the ones involved in developing strategies in order to reach the objectives of each client. It will take into account the inputs from the Accounts Management units which are tasked to understand what the clients’ aims to achieve. Closely related is the relationship marketing where marketing campaigns are launched with an emphasis on customer retention.
Consumer Advertising units are in charge of creating the actual ads either in-house or out-source to a specialist.
Media Services are the ones that do the media buying, sourcing out the right media for the right kind of consumers.
There are a whole range of specialist services that covers the different the different niche consumers out there. Some examples are the film production units, new media and digital unit and sports marketing.
Weaknesses in WRSX’s Processes
WRSX definitely have shone out from its competitors, having many highly specialised business units as mentioned earlier, however each of these units are spread out across the four geographic offices. Some notable ones are its range of business units providing a complete start-to-end service for its clients. Not all office has the capabilities required to function as effectively as compared to one office that have all of these business units.
It would have help if WRSX have shared the knowledge across the offices, creating synergies between the business units and thereby gaining a competitive advantage in terms of efficiency and economies of scale.
There would have been much more help if there was a policy for corporate governance where knowledge and information could flow naturally through to other offices. Greater efficiency could be achieved as each office now has greater knowledge empowerment to make more informed decisions.
No group-wide corporate governance policy has also led to reporting irregularities and scandal affecting the reputation of WRSX, which snowballed to affecting the share prices. In the aftermath, some shareholders have lost confidence in the WRSX’s non-executive directors and urge a change in directors. This will have tarnished some of the well-built relationships it has with its clients and pushing WRSX further away from attaining its goals.
Another group of stakeholders crucial in attaining its goals are its employees, who WRSX have issues retaining them when it lost its clients amid the many turn of events i.e. scandal of bribery.
External Environment Analysis (Opportunities & Threats)
Need to mention stakeholder with key drivers with strategy!
Economic – Growth of Asian Multinational companies
The growth of Asian-based multinationals has been tremendous. Many of these companies are doing so well, constantly expanding and adding headcount to capture the opportunity in the still infant market. Similar potential has arises from the Muslims countries, African nations, India.
Social/Demographics – Escalation of Consumerism in Asia Pacific
US had been a favourable choice for advertising due to its huge homogeneous market, ease of raising equity capital and strength in technology and digital media. However, the countries in Asia Pacific are slowly gaining more affluence, catching up to the countries in the west. China itself already has more than half the size of the consumers than the US market and this is increase in years to come.
Technological – Popularity of Internet & Mobile Phones
One technological product that has been growing in popularity significantly is the use of mobile phones and one of the biggest markets is in China. The Internet has also brought information to educate consumers faster than better. This together with the large consumer market in Asia Pacific only signals the need to tackle the more knowledgeable end consumers.
Social – Changes in Demographics
In US and Europe, retirement age consumers are increasing in proportion with the aging population and graduate-age consumers with Generation Y values getting more prominent in the market.
Economic – Unpredictable World Economy
Even with growth in the world economy in the last few years, the outlook for the medium and long-term is more risky and less predictable. A downturn is expected in the US economy with the scale of consumer debt and rising oil prices not doing it any favour. If there were any downturn, US will be hit the hardest as almost 50% of the revenue on global advertising comes from there.
Legal – Change in Manufacturing & Service locations
Western Europe and the US are having more stringent employment laws and this is pushing many clients to move their manufacturing and service location out of these countries to maintain labour force numeric flexibility and avoid litigation costs.
Technical – Effects of Manufacturing Overcapacity
Considering that clients are competing in a low-inflationary environment, with limited pricing power and concentrated retail distribution, the only way to compete is through innovation and strong branding. Clients are looking for mergers and acquisition to use their brands to drive up prices or through economies of scale to drive cost down.
Technical – Internal Communications
Helping the client emphasise on good internal communications, combined with retail concentration and significance of corporate responsibility can help create additional value for the clients.
Technical/Environmental – Emphasis on CSR
Competitors are looking at the investment in education and reduction of carbon footprint in promoting their CSR policies to their shareholders. Client will look at the amount and recyclability of packaging.
Implications of Opportunities and Threats
U.S., Europe and the western countries have become more risky and difficult to do business. Stringent employment laws have pushed manufacturing companies to other countries where they can maintain their labour force numeric flexibility. In addition, U.S. is expecting a downturn to hit its economy where more than 50% of the advertising revenue is created. Therefore, there is an urge for companies to look for new opportunity elsewhere away from the western countries.
One promising alternative is Asia Pacific where many companies are doing so well in the region, continuingly adding headcount. One complementary factor for their success is the growth in affluence of the consumers in Asia Pacific. Therefore, WRSX should consider focusing on Asia Pacific as the revenues gained from this region could end up offsetting any poor performance in its other offices.
The rise of the technologies like hand phones and the Internet has open up more avenues where end-customers could be reached with the client’s message. Some of these new tools have proved to be more effective in certain areas by reaching the target clients and promising a high return for clients than traditional methods. WRSX should learn to exploit these technologies and compete with others as they slowly become the norms of the industry.
The effects of manufacturing capacity have been the demand for greater innovation and branding to create differentiation and a competitive advantage over others. This spells a greater emphasis on differentiation for WRSX, adding value to clients business through branding.
On the lighter side of business, there has also been more emphasis on the goods of an established internal communication and a Corporate Social Responsibility (CSR) policy with a company. The alignment of internal communication with the clients’ retail concentration and importance of corporate responsibility are values that clients looking which WRSX should pay more attention to.
Industry/Sector – Porter’s 5 Forces
Threat of entry of ’boutique’ competitors
These smaller agencies compete on specialist knowledge and established relationships with the clients. They make use of targeted advertisements, combined with the advantages of internet like usage tracking, customer profiling and social networking sites as platforms to accurately capture the targeted end customers of the clients.
Their low start cost possibly from being a breakaway group from major agencies will put many bigger agencies like WRSX a run for their money.
The advertising industry is in the mature stage in Europe, US and developed countries and there isn’t much growth opportunities. Coincidentally, traditional media revenue is also falling. Thus, it is difficult to build bases of sustainable competitive advantage in these markets.
However, on the other side of the world, the strong emergence of consumer brands in developing countries and their emerging markets are promising as they are in their growth phase. This coupled together with new digital marketing media are showing many signs of potential. These new digital media are making advertising and marketing much faster, cheaper and more extensive than traditional medias and at the same time reaching its targeted customers.
WRSX Corporate Level Strategy
With financial figures showing as evidences, New York agency is performing poorly in comparative with the other three agencies under WRSX. Significantly New York agency has been spending too much time on many level of reporting, affecting decision making efficiency resulting to client loss. To boost WRSX overall corporate performance, WRSX corporate office aims to better manage New York agency reporting system.
New York agency
Comparing Paris, London and Singapore agencies which have similar reporting systems, these three agencies has achieved high market share in their growing market in their respective regions. Objective of WRSX corporate is to develop New York agency portfolio into similar portfolio to Paris, London and Singapore agencies with a standardizing code of reporting with proper systems, processes and structure among agencies.
Considering the cost and revenue together with debt, growth rates and capital, New York agency alone is expected to increase its revenue by £500,000 per annum, securing a bigger market share with the reorganizing of its reporting systems and structure.
Corporate Parenting Strategy
Although all four agencies of WRSX belong to the same WRSX corporate office, all four agencies function individually without much coordination from the corporate office. There is an absent of communication and knowledge sharing among the four agencies.
Corporate governance is to be restructured where managers are held accountable of their own behavior and to govern behavior in WRSX. WRSX corporate aims to clean up tainted image of WRSX caused by the allegations.
WRSX corporate aims to add value to its SBU in ensuring alignment of corporate and SBU strategies. To improve individual business unit capabilities, corporate monetary resources are to allocate to meet individual agency needs. With a corporate level strategy, WRSX will be able to increase its buying and selling power simultaneously increasing the barrier to entry to the advertising and marketing industry.
WRSX corporate has identified business units where WRSX corporate is unable to add value that is able to translate into critical success factor. Such business units fall into the category of value trap where they fit with WRSX opportunities for support but have limited understanding of critical success factors. WRSX are to redefine its back of house office which corporate is not efficient in translating the value. Cutting cost on sustaining on WRSX business unit that corporate office is unable to relate to the value to critical success factor is a feasible strategy for WRSX corporate to implement. Activities in back of house office are not directly influential to WRSX CSF. Outsourcing the business unit to a better corporate parent will allow better opportunities to be focused on and redirect the organisation to focus on them.
To prevent strategic drift, corporate parent is to have set a set of strategies to be taken into action. WRSX corporate office is to help improve the efficiency of individual business units by envisioning, providing vision to individual WRSX agency to follow.
As a corporate parent, WRSX corporate office can create more value to the individual agencies through developing a communicating and knowledge sharing information technology system. WRSX can tap on the synergies across the business units through coordinating and resourcing its capabilities from all agencies creating advertising and marketing services. With knowledge sharing all agencies are more competent in providing a complete range of services increasing overall value delivered to stakeholders. WRSX corporate office will act as a key controller of information, the setter and leader of strategy to all agencies, providing a common strategic direction and common pool of resources that all agencies can follow and rely on.
WRSX corporate office is to implement proper systems where managers are responsible for their duties and behaviors, therefore creating value to individual offices and organization as a whole. Managers held accountable for their own actions will incline decisions being made towards WRSX’s benefits than individual office’s benefits.
Improving communication and knowledge sharing among agencies foster the relationship among the agencies. Specialist demands from individual agency’s clients can be learnt from hitch on capabilities on other agencies. Adapting a heartland business, WRSX corporate office will be able to manage the communication and sharing across agencies effortlessly where all agencies are able to fit and feel into the WRSX corporate office, maximizing the translating WRSX capabilities into critical success factor.
WRSX corporate office will set guidelines for individual offices to follow to meet their objectives, information is to be screened and pass through a structured format. Job scope are clearly defined such that managers make legitimate decision that deliver value to organization and stakeholders. Setting benchmarks and targets for managers to achieve and fully utilized WRSX highly competencies talent. Good corporate governance is a key to meet CSF for WRSX and only through corporate parenting strategy; WRSX will be able to lead the agencies towards it.
Management of costs, bureaucratic complexity and obscuring financial performance are the keys consideration to be considered before WRSX starts implementing the strategy.
Providing central services and resources in the heartland of the business
Feedback: Executive sub-committee of the non-executive directors that conduct review of the new WRSX corporate governance model
Board Meeting 1
Agenda Item One: Market Opportunity in China
WRSX aims to have a piece of market share in Asia as many competitors companies in the industry already set up bases in the Asia market. To make full use of the opportunity in the upcoming second largest market, China, WRSX need to act strategically in internationalization.
WRSX has identified the opportunity in China adverting and marketing market which has been remaining a rapid growth but their local advertising and marketing are still at a developing stage. Foreign firm services like WRSX are preferred in China’s market as we are at a mature stage in the industry. Another key reason for WRSX to enter China’s market is due to the fact that WRSX has major, global clients that trade in China, WRSX need to make a presence in China in order not to lose them.
Considering competitors first mover advantage in China, WRSX will go with Action Option C as WRSX is not very familiar with China’s market and culture. With a strategic alliance, WRSX will at least be on par with its competitors in terms its understanding of China’s market, culture and networks. Since Victor Xao has an outstanding track record, WRSX board can trust him. Instead of doing a joint venture with the Chinese agency, WRSX can consider doing a network alliance where WRSX can tap of the Chinese familiarity of China and at the same time risk impacting from a wrong choice of partner will be minimized. Action Option C is selected instead of others is due to the relatively low amount of financial risk in comparison with the other options.
Agenda Item Two: Sustainability Profile of Group
Attract more potential investors to positively impact WRSX share prices (Internal)
There is a growing emphasis in recent times on green companies or at least have some green initiatives, which WRSX cannot be ignored if they were to increase its overall shareholder value. Shareholders are pickier nowadays, choosing to invest in companies with actions in reducing its carbon footprint and sustainability compared to one that has not.
Shareholders aren’t the only group involved; attraction and retention of employees and clients are also closely link to this issue. Having come aspects of green initiatives in the company’s processes is generally being accepted as a more successful company, therefore naturally gaining more interest from top talents and clients.
Option C should be chosen as WRSX should create a group-wide sustainability agenda to fill the gap in that area. With the new committees made up of interested internal employees and external ‘sustainability expert’, it only symbolizes higher effectiveness and success in boosting sustainability of WRSX. Each office will customize its own action plan fitting its local environment yet there will be reporting to local board to share best practices and ensure some alignment to group-wide policy on sustainability. Thus there is some alignment to group-policies yet individual offices are efficiently managed and no possibilities of talk trap.
Option A was not chosen as there wouldn’t be a consistence in the overall ‘green’ policy across the various offices leading to a mixed image portrayed. And Option B is a relatively risky move as it involves segregating the “non-green” clients from the rest which may be seen as an overly aggressive move to create a clean slate in its record, stakeholders may not be extremely impressed by this.
Nonetheless, there is going to be a substantial financial cost required to get this running but this is just on par with some of WRSX’s major competitors. This option will help create a high-profile green agency image, thereby improving WRSX’s market position, its CSR stance as well as broadening its breadth of service provided with more ‘green-focus’ advertising option, similar to horizontal integration.
WRSX is already playing a catch-up game in the area of sustainability therefore competitors reaction will be limited to just imitating some of the best practices i.e. local office looking after their own policies.
One feedback mechanism that can be considered is looking at WRSX’s market position, whether has it improve over this move, being seen as stronger player among the competitors e.g. WPP and Omnicom. Do a survey on clients and talents out in the job market before and after the implementation, checking whether WRSX has improved its profile as a more ‘green-orientated’ agency. Looking at the shareholder’s reaction can reflect the success and failure of this plan, an increase in share price will means success.
Agenda Item Five: Cultural Change in New York
The aim to cultural change in New York, standardize code of reporting with proper systems, processes and structure among agencies in order to increase efficiency and productivity of New York agency and WRSX as a whole. WRSX is to do that in order to improve the revenue of New York agency and WRSX as a whole. Alignment with the goal of providing top quality advertising and marketing services which are valued by clients.
We need to consider the below key piece of information before make determine what are the steps to be taken to change the culture in New York.
There is a trend whereby decisions about important and urgent matters, many of which relate to clients, are delayed, sometimes to the detriment of the business in the New York office leading to a loss of clients after contract period.
It difficult to transfer people into the New York office or to get them to work on project teams under some of the top NY managers, as they feel de-motivated by their lack of authority.
To worsen the situation, some of the very best talent in New York seems to be leaving the agency and exit interviews have highlighted ‘lack of respect’ and ‘autocratic working environment’ as a major reason for leaving.
By adopting action option A, WRSX will be able to align the management of New York agency with other agency by reducing the number of management level. Issues of inefficiency due to junior managers unable to make decision will be solved as now they are being empowered the rights to make decision with less level of management. With the alignment of management across all agencies, transferring of people into New York agency will be less of an issue. Talents will be retained as they are rewarded intrinsically, gaining due respect in their field of professionalism.
To reduce risk and cut cost, Action Option A is preferred over Action Option B and C, as moving of leaders among offices will result a higher cost to WRSX. There will be ambiguity in the management style of New York as objectives are unclear with the displacing of leaders, it will take a longer period of time to implement the new culture in New York office; reaping benefits from the change of culture later.
Agenda Item Six: Opportunities in Digital Media
Having witness the increasing amount of advertising dollars clients are putting into digital advertising in recent months, WRSX should minimally set foot into the digital advertising to gain first mover advantage. Consumers are more IT-savvy and going digital is the most effective means of advertising. Forecast also shows that the biggest growth in advertising will come from digital media and thus reducing the effectiveness of mass media traditional advertising agencies. Having understood the potential of digital media advertising, WRSX should make a move to make digital advertising a strategic business unit.
Option B should be the right decision for WRSX as they need set a foothold in digital advertising but yet with reduced risk of capital investment. WRSX already has a poor record of managing financial risk, therefore letting each office deal with the local digital supplier to deliver digital service to WRSX clients not only reduces the risk but also lighten the load of keeping pace with the changes in digital advertising. Option C is let go as reports of other company getting to the end of the deal is likely thus WRSX may end up empty-handed. And Option A is too big an acquisition for WRSX to management which may hurt its non-performance indicator. Moreover, there seem to be a clash of culture even though one could lead the other to success.
With minimal input into digital advertising and yet being able to gain significant first mover in this area of advertising. This will definitely bolster WRSX industry position, making them almost an all-rounded service provided of advertising solution. This competitive advantage is important as many competitors are taking similar action towards this area and some have greater financial and operations strengths to absorb a new digital advertising arm.
To check if this move is effective, WRSX should continually measure the growth in this market sector and the share that WRSX is providing towards. If there is a decreasing in the share, means that WRSX should take a bigger move to further capture a bigger slice of the pie.
Board Meeting 2
Agenda Item One: Reducing Client Churn
The client churn situation in New York office is more serious than other offices, as WRSX’s clients are unsatisfied with their current service deliveries. This adds to the cost as new clients need to be sought out and the savings from long-term collaboration efficiency will be lost. WRSX should no longer depend on its excellent creative quality to attract and retain clients as other aspects i.e. understanding of client’s business and experienced personnel, adds to clients’ satisfaction of service standards.
Option B should be chosen as Accounts Management teams have a better understanding on the satisfaction of the clients, whether are they coming to the end of the client-agency relationship tenure. The Top 10 clients shouldn’t be limited to only big spenders as mention in Option A as most clients are long-standing business partner and the degree of collaboration makes client churn very unlikely, but rather look at those clients that are at risk.
The Client Relationship Managers (CRM) has an important role if WRSX is to come down hard on tackling this client churn issue. Their role includes raising awareness of delivering excellent client service, meaning to answer queries on understanding of clients businesses and providing inputs and advice to drive operating units’ growth. Best practices are also shared across office and the group. Therefore Option C should be forgone.
This is somewhat an unrelated diversification strategy, where WRSX will create this new CRM post to counter-check the service standards that it is delivering and share across board best practices. Together with the inputs from Accounts Management team, WRSX can provide satisfactory service and at the end of the day manage a good client relationship. As the market is in a mature stage, there should be too much investment but some cost should be involved however the benefit from this relative significant. If WRSX does no