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The growth in the advertising industry world-wide has been growing in every year, and advertising industry is one of the most helping global economy increasing more than billion dollars’ every year, by advertising contributes to wider economic growth through it ability and providing the consumers with information on the service and products to help increase easy way to consumer to choose of the services and goods. In this report will generally discussion on new business report development by the new director of WRSX in to internal and external environmental analysis of the organisation. Furthermore, in the business report is using capabilities strategic, business theories and concepts model with analysis tool to understanding organisation, competitive position, global industry market and business platform to adept to change the organisation for improving capability and accountability in Asian.
II. Critical Strategic Issues of Organisation
WRSX group is a midsize advertising agency company that has been found more than 15 years, and the organisation a long- established with London, New York, Paris advertising agency and three more new companies merged agency with many clients in every year. As the company has established and ready having power in western. Thus, one of the critical strategic issues on the internal competitive position of WRSX is whether WRSX has the necessary resources and capabilities to exploit the market opportunities in Asia.
2.1. Internal Competitive Position of WRSX (VRIO)
The analysis of the company’s capabilities is on the basis of the company’s value, rarity, inimitability and organizational support (Das 2016). The company’s value is value added to customers in the market, while such value can be reflected by the company’s share price and financial performance. However, the company’s share price was reduced in the long term continuously, which indicates that the company’s financial performance is not attractive by investors in the market so that it is more likely for investors to believe that value added to customers in the market for the company’s products and services provided is not as good as expected. Moreover, the company’s PBIT margin was about 16%, which was lower than the industry average. It indicates that the company’s profitability was lower than the industry average, which means fewer customers were attracted by the company when doing business. In such circumstance, it is less likely for the company to provide products and services with significant value added to customers in the market because significant value added to customers will lead to attracting sufficient customers in the market to the company (Worimegbe et al. 2018).
Moreover, the extent of inimitability of products and services provided by the company is also questioned. The company’s business strategy is to diversify products and services provided in order to reduce the business risks faced with the intention of cost control when doing business. Thus, it indicates that the company pays insufficient attention to research and development when doing business in the advertising industry when the changes in the advertising industry are quite significant and rapid. In addition, the major way of the company’s growth after the company was listed in the stock exchange market is merger and acquisition. In such circumstance, it can be argued that the extent of inimitability of products and services provided by the company is at the low level because the company does not spend significant capital on research and development in order to ensure other competitors are difficult to provide similar products and services to customers in the market, which may also have significant contribution on making the company’s financial performance worse than industry average (Spicer & Hyatt 2017).
Meanwhile, in such circumstance, the company does not pay sufficient attention to providing unique products and services for building the unique competitive advantage over other competitors in the market. Thus, it can be argued that the rarity of products and services provided by the company is questioned although the company claims to become a creative, innovative and customer-driven company. In fact, the market competition in the advertising industry in the global market is quite significant due to the significant number of competitors participated in the market. In such circumstance, customers in the market can see various similar advertisement frequently so that it can be argued that the rarity of products and services provided in the advertising industry in the global market can be considered as at the low level. Nevertheless, the company’s financial performance that is worse than industry average indicates that the company’s products and services provided to customers are easy to be replaced and not as attractive as expected (Brinson et al. 2016).
In addition, it is also questioned whether the company is able to provide sufficient support for exploiting the market opportunities in Asia. The size of the company is considered as the medium, which indicates that the company is less likely to compete with large companies in the global market especially when the company intends to enter into the new market in different countries. Moreover, in order to exploit market opportunities in Asia, it is necessary for the company to spend significant capital for achieving such an objective. However, the company may not have sufficient resources to support such exploitation. According to the company’s cash flow statement, it can be argued that the company has significant cash and seems to be able to be spent on exploitation. However, according to the company’s financial statement, it is clear that the company’s current asset is much less than the company’s current liabilities. Meanwhile, the majority of the company’s non – current assets are goodwill so that it can be argued that the actual noncurrent assets that support the company’s business operation is quite limited. In such circumstance, if significant capital is spent on exploiting market opportunities in Asia, the company is more likely to suffer financial difficulty due to the low level of liquidity. Particularly, it is not appropriate for the company to raise funds through debt financing because the company’s current liabilities are already considered as quite large. Also, it seems to be not appropriate for the company to raise funds through equity financing. Although the company is a listed company with significant cash on hand, equity financing may make the company face more risks on losing control, which may have the significant negative influence on the interest of key shareholders in the company. In addition, when potential investors know the company’s financial performance is worse than the industry average, fewer investors may be attracted to invest in the company especially when they discover the company’s short-term financial liquidity is at the low level. In such a circumstance, the increase in the risk of losing control faced by key shareholders may not be able to raise sufficient funds to exploit market opportunities in Asia (Morris 2014).
Therefore, it can be argued that the company may not have sufficient resources and capabilities to exploit the market opportunities in Asia. Instead, it is necessary for the company to focus on building its unique competitive advantage and provide unique products and services through effective innovation.
2.2. External Environment of WRXS take advantage of business opportunity in Asia
North America are the largest advertising market with the highest expenditure of 825759 U.S. dollars from 2009 to 2013. However, the region that has the largest growth in advertising expenditure is Asia Pacific with the average growth of 6.99 percent compare to North America where it has steady growth in the table 1 below. Asia Pacific has growth from 23.26% to 25.10% whereas North America has decrease from 36.51 to 33.60 from 2009 to 2013. Therefore, WRXS shall seize this potential business opportunity in Asia Pacific.
Table 1: Annual Growth Rates of advertising expenditure by Region
The growth of purchasing power and market size in Asia Pacific boosts the advertising demand in the region. Asia Pacific growing economise like Indonesia, Malaysia, China and Philippines have an increment of 7.5% annually average in advertising spending. At the same period, Hong Kong and Singapore, South Korea, New Zealand and Australia also increase 3.4% in average annual growth. From the research, western advertising multinational agency like J. WALTER THOMPSON, AnalogFolk, and Anomaly have built their present in Asia pacific respectively at Mumbai, Shanghai, Hong Kong etc. Western advertising company expecting an increase of 70% for their future growth and 40% of it coming from India and China alone.
WRSX is a global advertising agency operating in New York, Paris, London and Singapore. Currently, Singapore is the only headquarter in APAC region. The aim of this study is to understand the environment factors in APAC that will help WRSX to seize the business opportunity and expand their business in this fast growing APAC advertising market. The following are the external environment factors that will affect WRXS to expand their business in APAC.
Political and legal factor
Advertiser in APAC is currently facing challenge with GDPR which is the law implemented to governing the use of personal data strictly for advertiser, a standard for data security and consumer privacy. Through GDPR, APAC consumers will be granted the right to decide how and when their data is being used. As most of the advertisers are data driven that rely on consumer information to elevate brand advocacy and retain consumer loyalty. Therefore, advertiser unable to understand and learn about the need of consumers. WRSX should build an engaging social media presence with advertising content that will gain the audience attention.
From the study, the rise of population and affluence in APAC causes the western firms that operate in APAC expanding rapidly. WRSX should focus on APAC market and offsetting poor performance of its other offices. APAC country like China which has the biggest population with 1.5 billion should be WRSX priority as WRXS major global clients are trading in China. WRSX should enhance their presence in China to retain their clients. The advertising effectiveness in APAC is ridiculously high as the advertising spending per person is only 15$ compare to US and Europe. Due to the high effectiveness, the global brands are trying to expand their business in APAC and causing high demand in advertising. Besides that, availability of cheap labour cost in APAC will lower WRSX expenses and benefit the increment of its overall profit.
APAC is comprised of many countries causes the challenge of social culture different. There are some degree of media control and self-censorship for advertiser to run their company in APAC. WRSX should consider advertisement content depend on the socio cultural values and religious for particular country. Multinational like WRSX should adopt advertising standardization based on product type marketed in APAC markets. The product type have significant factor to the decision of regionalize the standardization or adapt locally. The favourable attitude of APAC consumer towards the country of origin of the brand is one big factor of standardized strategy.
Through the study, consumer in APAC are the most supportive for cooperate socially actions in the world. These sustainability practices have significant influences to consumer purchasing decisions. WRSX should promote CSR policies to client with the product that able to rise in environment friendly awareness.
Digital media advertising is the key driver for the rise of advertising spend in APAC as it has the largest market for digital advertising. WRSX should develop a digital advertising unit so they will get into the latest trends of digital advertising. The rise of internet accessibility in APAC making the digital advertising rapidly growing. Mobile search overtake on desktop search in years to come. However, the email unsubscribed rate in APAC has total of 91%, it appears that WRSX should concentrate on the content so they could engage and delight customer. The rise of ad blockers has become advertiser nightmare which it will alter or remove advertising content on webpage causing reduction of advertising presence on internet. WRSX should create content that is interesting and gain attention from customer and create channels to advertise their product. Lastly, Google and Facebook, Youtube, Instagram achieve biggest percentage of digital advertising spend in APAC. As an advertising agency, WRSC provides range of services from marketing, design, strategy to technology service. But due to the easy interface and technology, Facebook & Goole might take advantage of it and bypassed WRSX and sell the services directly to client.
The threat of entry
Low start-up capital requirement
The barriers to entry are low when there is only low capital investment are needed for an advertising firm to start up in the Asia region.Often,an advertising agency only require minimal physical assets but the industry highly reliant on creativity and knowledge.Low capital outlay to set up an agency encourage competitors to enter in the asia market.
Incumbency advantage of local knowledge and Experience
The incumbency advantage of learning effort and cumulative experience help incumbants to produce more efficient.There will be risk exist if new entrant are lack of region local culture knowledge and causing potentially disastrous to run the agency.For example,an advertising content has offend some perspective of local culture because the foreign advertiser have lack of knowledge about the region and culture and causing big trouble for the firm.Therefore,local knowledge is the key to succeed for foreign advertiser enter Asia market.
Threat of substitutes
The backward Integration of buyer in house marketing
In house marketing has partially become alternative to third party advertising.Due to the reason that many buyers have set up marketing department and these in house marketing departments liaise with different third party supplies and monitor suppliers deliveries. without hiring a thirdparty vendor,the buyer also can choose to do in house with media buying and all of the advertising campaign by investing a team of experts.However,It could be very costly to hire all the experts in all activities of advertising and marketing if the buyers might only need certain marketing research activities in particular time.Hence,provide with cheaper price can prevent buyers from integrating downward.
Before the widespread of internet advertising, advertising agency were a necessary source that had the data for the brands to reach its potential customers. But today, programmatic advertising has changed the face of advertising where brands can make the ad buying more efficient with cheaper price. As it doesn’t involve any human interaction for ad purchase, it is an urgency for advertising to find a way out to survive in the advertising industry.
III. Recommendation for Business Planning
It is clear that Asia Pacific has excellent potential for a business breakthrough and WRSX can definitely take advantage of this opportunity to further expand their company and become a top 20 agency. However, it is not in WRSX’s current best interest to do so as expanding the company will involve extensive funding which may increase profit by a small margin but will have no effect on the quality of services.
WRSX should instead focus on firstly closing down units that are redundant and have low contribution towards the company’s earnings. Rather than having four Office Central Services units, WRSX should centralize the office services to one regional office in order to better streamline internal processes. This would also cut down on costing and allow for more investment in quality. Centralizing processes will increase efficiency of the company, provide a more holistic view of the company’s projects and enables easier identification of risks. The suggested branch for the central office unit is the London office since it is WRSX’s main base of business. Therefore, all internal management decisions and issues will be redirected to the London office.
WRSX should also take advantage of emerging marketing trends in digital media. The Singapore office has already included a New Digital/Media unit to focus on these aspects, but the New York office should set up a unit for this as well since North America has a large market guaranteeing more clientele. With more funds channelled towards research on digital media marketing, these two offices can further improve services by providing trendy marketing ideas to keep businesses at the top of their game. Businesses want efficiency when it comes to their creating marketing plans, hence a company that would be able to provide a variety of services under one roof would be most beneficial (The Drum, 2016). The clients receive a broader overview of their marketing plan and will not have to move from one agency to another to handle specific requirements.
In order to take full advantage of these aspects, WRSX should work on improving the quality of their performance and outputs. WRSX should procure more talent for the company to increase their performance. Better skills equal better results, leading to stronger reliability and capabilities, and higher market value. The company should screen their employees for those that are underperforming and dismiss them before hiring new talent. These talents should be well equipped with the necessary skills to manage projects that require knowledge on current digital media trends in addition to traditional marketing trends.
CSR can be a major contributor to earnings for the company. WRSX should begin on reducing their carbon footprint and implementing as many recycling procedures wherever possible. This would enhance the company’s reputation not only for their clientele but also within the surrounding local communities. Participating in local community projects that share similar values with WRSX can also boost the company’s image and could be a good strategy to promote the company’s services to members of the community.
Once WRSX has worked on these different aspects, and company earnings have been raised, only then would it be affordable for WRSX to expand the business further and break into the China market.
IV. Reflection on the team performance
There are four members of the business plan report which has; Yap Hoi Wain, Rudao Wu, Farah Hani Muhamad Maim, and me (Cheayong Chan). By the report has performing with high quality and standards because our policy decision making is following by consensus that sharing equal work with members, and asking which part who are confidently and surely to do for making sure all the group members accept the decision and satisfy with their work. As completing this business plan report, we have separate the report which in four part such as; organisation internal, organisation external, team recommendations on both internal and external origination developing and reflection on team performance. All the team members have contributed, bring the teammate’ ideas and making problem solving every well to complete the work on time with quality, by using Tuckman’s model. Tuckman’s model is helping the team can deal with any problem and face up to find the solution, and there are four stage of the Tuckman’s model including; forming, storming, norming and performing that have ability to help explanation of team development and team behaviour (Rickards and Moger 2000). The first stage is forming, refer to the group members establish relationship to take the task behaviour and started creating the rules or group policy (Bonebright 2010). For example, in the forming stage reflect on the first time that all my group members had not known each other before and start forming the group. The second stage of Tuckman’s model is ‘Storming’ refer to the time of the member of intergroup conflict. Norming is the third stage, represents the team member’s behaviour by trying to understand, listen each other, and accepts other express, each other opinion and ideas to bring the ways to work as a team (Bonebright 2010). The final stage is ‘performing’ refer to the group the functional role to performing the team goal. After understanding each other and getting motivation, knowledge and flexible in the team, this stage will become the play role (Bonebright 2010).
By understand and following the Tuckman’s model, my group can adept and easy working to bring teammate’s ideas together as a team with high performance. In addition, we also can collaboration the creative thinking and problem solving in the process of working on the report towards to complete it on time with quality.
Reviewer’s Details: By Cheayong chan
Student ID Number
Instructions for Peer Reviewing on Each Team Members for all Their wok:
Using the table below show each criterion, by rate each team member from 1 to 5.
Team Member One
Team Member Two
Team Member Three
Name & ID
Yap Hoi Wain
Farah Hani Muhamad
Participated in team meeting and discussions
Regularly provide helpful ideas
Quantity of work done
Contributed fair share to overall workload
Helped keep team focussed on tasks
Met deadlines and schedules
Quality of work done on designated task
Contributed to project creativity or implementation and monitoring
Satisfaction on work
Total Score out of 10
The timetable above has shown all my team members participated and work on the business plan project in this report. Every member have working hard to completed the same goal even we are having different language and culture, and having time problem because everybody has their part time job and self-study. However, we still find the ways to made it work by explaining, understanding, and using social media including (Email, skype, Facebook and SMS) to resolution of the problems.
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