foundations of management · pdf filefoundations of management assignment ... making fees...
TRANSCRIPT
1
FOUNDATIONS OF MANAGEMENT ASSIGNMENT
“A Strategic Review”
Case: Action Global Communications (AGC)
International Public Relations Company founded and
headquartered in Cyprus.
By: Anna-Denise Ioannou
2
1. INTRODUCTION ................................................................................................................... 2
THE CASE ................................................................................................................................ 3
2. VMOST ANALYSIS/STAKEHOLDERS ............................................................................... 3
2.1 VMOST ANALYSIS ............................................................................................................ 3 2.2 STAKEHOLDERS ANALYSIS ................................................................................................. 5
3. EXTERNAL ANALYSIS ........................................................................................................ 6
3.1 PEST ANALYSIS ............................................................................................................. 6 3.2 LIFE CYCLE ANALYSIS .................................................................................................. 8 3.3 THE MAJOR COMPETITORS ......................................................................................... 9 3.4 THE CUSTOMERS...................................................................................................... 100
3.5 PORTER‟S 5 FORCES MODEL……………………………………………………………..11
4. INTERNAL ANALYSIS ....................................................................................................... 12
4.1 VALUE CHAIN ............................................................................................................... 12 4.2 MC KINSEY 7S MODEL ................................................................................................ 14 4.3 FINANCIAL PERFORMANCE ....................................................................................... 16
5. SWOT ANALYSIS AND CONCLUSIONS .......................................................................... 17
5.1 SWOT ANALYSIS DISCUSSION .................................................................................. 17 5.2 CONCLUSIONS ............................................................................................................ 19
6. OPTIONS AND RECOMMENDATIONS ............................................................................. 19
7. REFERENCES/BIBLIOGRAPHY ....................................................................................... 20
8. APPENDICES ..................................................................................................................... 20
APPENDIX 1: VMOST ......................................................................................................... 22 APPENDIX 2: STAKEHOLDERS ANALYSIS ...................................................................... 23 APPENDIX 3: PEST ANALYSIS .......................................................................................... 26 APPENDIX 4: VALUE CHAIN .............................................................................................. 30
1. INTRODUCTION
This assignment attempts to examine the competitive standing and future of AGC, a Cypriot
founded and headquartered Public Relations company with a presence in 36 countries for
3
more than 35 years, employing a team of more than 200 professionals - with a turnover of
€24.5 million for 2005. In doing so we are going to examine the external and internal
environment of the organization, by using business models that will help us conduct a SWOT
analysis and evaluate AGC‟s VMOST in order to reach some conclusions concerning the
organization‟s strategic position. A brief description of the company is given below.
COMPANY HISTORY AND BACKGROUND
AGC was founded in 1971 by PR-industry guru Tony Christodoulou – currently CEO, to
generate the power of public relations in emerging markets (East and South Europe, North
Africa, Central Asia and the Middle East) by operating an international network and acting as
a regional hub and single point of contact for the clients. AGC‟s core practice is the creation,
development and implementation of region-wide PR campaigns, in a wide spectrum of
sectors including aviation (British Airways in 28 countries), travel & tourism (Visit Britain,
Radisson Hotels, Four Seasons Hotels, Cyprus Tourist Organisation), IT, sports marketing
(World Rally Championship, Paris 2012) oil & gas (OMV), banking (Nomura Bank, Bank of
Cyprus, Piraeus Bank) real estate, and automotive (BMW) etc. AGC expanded rapidly the
past 5 years by buying out local partners either fully or partially. This move has created
problems with its financials and forced the directors to acknowledge the need of a
comprehensive business plan, leading to the development or enhancement of Finance, HR,
New Business and Client Service departments, to remain a key player and profitable entity.
2. VMOST ANALYSIS/STAKEHOLDERS
2.1 VMOST ANALYSIS
In short the analysis of the AGC‟s VMOST found in appendix 8.1 is clearly focused on new
business followed, by improvement of profitability, cost control and effective use of existing
infrastructure. The involvement in the new business tactics of the country managers and the
4
necessity of inspiring and involving all the employees in the company‟s strategic plans seems
imperative; while current levels of client service must reach high standards.
AGC‟s recent designed vision, to make public relations the lead discipline in the
communications mix for the region it operates, is highly ambitious while the mission
encompasses its purpose of existence. Although both are well written; lack of commitment
from the directors and effective communication among the network of either statement results
in an unclear direction and absence of commitment. On the other hand the objectives meeting
the „SMART‟ analysis are simple and straightforward. Therefore provided the „network engine‟
commits and focuses on them immediately, actual results (in short: 3-5% increase of new
accounts in each office, focus on value add services and improve cash flow and margins by
controlling costs and capital management cycle) could be achieved within the determined
time frame. Moreover AGC‟s three faced strategy; includes short and long term goals
supported by door opening tactics, focus on new business by achieving growth using the
existing infrastructure in the short term and improving financial position in the long term.
In simple words, we could say that strategy and tactics are well designed but implementation
hangs in thin air. Unless an incentive scheme, substantial training, performance monitoring
and fusion of passion by the directors are set in motion in a consistent manner, the entire
business plan of Growth – Increase Revenue – Vision; will be extremely difficult to fulfil.
2.2 STAKEHOLDERS ANALYSIS
AGC‟s has eight important stakeholders, divided into external and internal; shown in Fig. 1
(Stakeholders Map) and analysed in more detail in appendix 8.2. Stakeholder management
should primarily be concerned with long-term strategic decisions, because is important to
know about their expectations and to determine, to what extend they could and would exert
an influence.
Most influential stakeholders are analysed below.
5
Internal Stakeholders:
Directors- AGC founded and still owned by the same family was build and is strongly
depended by their performance on a personal basis. Having complete control on expansion
decisions and budget allocations; gives them the highest level of interest and influence. In
addition they monitor and influence almost all activities on a daily basis. Clearly, immediate
profitability and family motives (strongest expectations) are the driving force of the directors,
goals which are aligned with the strategy and objectives. Rather short sighted approach
though, lacking real commitment to the Vision and Mission statements.
Employees-On the other hand, AGC being a public relations company depends immensely on
the excellent levels of service delivered by its „satisfied‟ employees to maintain and acquire
new clients. This issue is not much appreciated by the directors who need to reconsider
offering valuable job benefits (dedicated HR schemes) in order to decrease the high level of
staff turnover and enhance the feeling of belonging in a solid and reliable organisation,
(expected attributes from employees leading to pay rises and bonuses). Even though the
employees have no say on the decision making process, are the face of the company. At the
very least, they need to be communicated the key goals and objectives.
External Stakeholders:
Clients- Evidently the objective to offer impeccable service; meets the client‟s expectations of
receiving ROI, leading to successful communication campaigns which generate sales
opportunities and positive reputation management for them. Retention of existing and
acquisition of new clients is the major influencer of the company‟s revenues.
Therefore the company must ensure that the client‟s perception of its services matches their
expectations more than they expect!
Suppliers- They have great power over AGC operations and client service delivery levels,
because the company depends on their „mood‟ whether they will publish or cover a story
generated on behalf of the client. AGC does not pay the media nor has advertising budgets to
allocate; therefore maintaining excellent relationships with the media is a priority and a
constant effort. Examining AGC‟s successful business tactics so far proves that the media‟s
expectations are met successfully via being a credible and transparent source of information.
Fig.1 Stakeholders Map
6
A
Stakeholder Power
Fulfilm
ent o
f expecta
tions
P
Low
10
5
1
High
5 10High
Internal Stakeholders : Board of Directors,
Employees, Management
External Stakeholders : Suppliers, Public, Government,
Clients, Competitors
B
E
M
COM
SG
CMonitor Closely
Keep regularly informed
Lobby actively
Keep informed-
Remain aware of their
contacts with others
Keep informed regularly- stay attuned
to their needs and behaviours
Keep advised – low level
reaction
Therefore, since AGC operates within complex, culturally different and emerging markets
must constantly assess and evaluate the external forces of interests and influences and
adjusting them with corporate objectives.
Following in our analysis, we are going to take a look in the external environment of Action
Global Communications.
3. EXTERNAL ANALYSIS
In this part we aim to give a representative analysis of AGC‟s external environment in order to
understand the challenges of the highly competitive market of PR services, in the regions it
operates by using various academic business models as the PESTLE, Life Cycle,
Competitors analysis methods and the Porter‟s 5 forces model.
3.1 PESTLE ANALYSIS
Ideally to thoroughly analyze the environment in which AGC operates we could conduct a
PESTLE analysis for each region; Middle East/ Balkans/ Central Europe / East Europe and
North Africa, because an external influence could have a positive impact in a specific region
7
while at the same time have a negative impact in another region. Since the main problem with
PESTLE factors is that they are continuously changing; is important to analyze what is
affecting the company now. Therefore, for the purpose of this assignment we have conducted
a more generic PESTLE analysis found in Appendix 3, focusing on the main threats and
opportunities facing the company as a network.
Key current Opportunities:
Despite the global trend of reducing operating costs as a priority, the marketing departments
still enjoy high budgets; whether are intended for advertising, marketing or public relations.
Most importantly, corporations the past 3 years are shifting from the traditional „costly‟
advertising campaigns and search for more innovative and alternative ways of communication
via „value for money‟ public relations methods. Clearly this global economic trend of allocating
higher budgets for PR activities; is a huge opportunity for AGC for all markets; because its
client base is consisted both of international (high pr budgets) and local clients.
EU‟s recent expansion of adding 10 new member states including Cyprus is proving a door
opener for new business. Cyprus remains the most prosperous of the new member states, as
both inflation and unemployment rates remain relatively low.
Healthy facts which allow the H/O to use its current infrastructure and become a valuable
partner; acting as a single point of contact for global clients who wish to do business in these
countries. Presence of more than 15 years in the Balkans, in Eastern and Central Europe,
strategic affiliations with local agencies and highly experienced staff are AGC‟s network
powerful competitive advantage. (Positive change in the political environment).
Normally language and cultural differences tend to be an obstacle in business, but for AGC is
an opportunity. Employing more than 200 professionals, mainly local staff in each agency (36
countries) under the H/O support and overview; enhances client service and creates real
relationships between the client and the suppliers (media) being the hardest thing to achieve.
Along the same lines, changes in lifestyles; positively challenges AGC core ability to adjust
and present innovative PR ideas to the client.
Key current threats:
8
However, not everything is as bright as it seems until now. Real threats exist as well.
Intense competition affects the industry immensely by acquisitions, unfair practice, and loss
making fees (just to win a specific project with the prospect that the client will become a long
term one.) The domination of this market by few multinational agencies (quite often
Advertising ones, offering PR services for free on the side) who strive for market share
-sometimes at any cost – was, is and will be the greatest threat for AGC. This profession has
no limiting entry requirements; anyone from former employees to senior retired managers can
start up a PR agency. In addition is important to continually identifying the strategic policies of
the competitors and comparing them against AGC‟s, i.e. benchmarking of growth or
acquisition strategy. Moreover, focusing on new business opportunities and reassessing its
competitive position in relation to competitors, is in line with the strategy and objectives set.
Level of education, finding and holding qualified people are another competing element
among agencies. People are the face and heart of AGC. Demand for these people is rising
due to growth plans of large consulting agencies, while on the other hand many graduates
choose to join start-ups. Without a doubt, ongoing investment on the human capital is needed
for AGC.
In short the major external driving forces in the PR consulting industry are:
all the changes happening in the clients‟ environment ( Threat and Opportunity)
the rising competition within the industry (Threat)
the investment on human capital ( Opportunity )
the developments in the areas of technology ( Threat and Opportunity)
3.2 LIFE CYCLE ANALYSIS (LCA)
As a principle where LCA is used to evaluate procedures rather than products, the information
can help ensure appropriate choices are made. Following the different stages of the LCA
(Johnson & Scholes 2001), AGC depending on the region it operates can be placed in all five.
In the Middle East – booming markets- and in Eastern Europe – emerging markets - the
company gains market share daily while for example in Greece it strives to keep it, let alone
gain in expense of the competition. Of course the strategy and objectives set need to be
adjusted accordingly for each country, but following their main direction are applicable. Finally
the network as an entity is at a growth stage.
9
3.3 THE MAJOR COMPETITORS
The competitors affecting AGC network are divided into two main groups:
Multinational agencies i.e. Weber Shandwick, Hill & Knowlton, Porto Novelli.
Having high operating costs, being faceless, weak presence in AGC‟s operating
markets; give to the company new business opportunities. Main threat remains their
strong brand image; when it comes in terms of winning international clients –
„Stealing international clients from multinational agencies‟ is an objective set for this
year.
Local agencies. I.e. in Cyprus is DELEMA, Marketway, Gnomi. These agencies
(dominate Cyprus PR market) are advertising ones offering PR services on the side
to their customers. Generally companies in Cyprus assign their PR needs to their
advertising agencies for two reasons: a) PR tool is underestimated b) Saving of
Budgets.
This practice creates both opportunities and threats for AGC, being a purely PR
agency. Eventually clients realize the value and differences of PR Vs Advertising
methods offered to them by advertising agencies which DO NOT have dedicated PR
departments. On the other hand advertising agencies started to acknowledge this fact
by creating PR departments. AGC should take this opportunity and act aggressively
to win new clients.
3.4 THE CUSTOMERS
The scenario with the customers is the same as with competitors:
International customers – British Airways, Goodyear, Siemens, BMW etc.
Controlling costs and decrease in budgets while maintaining value for money deals
and successful results; is a major trend within international corporations. Therefore
10
AGC‟s cost effective PR campaigns, established network and experience, allow the
company to be a serious choice of potential clients when choosing an agency.
Local customers – Any company requesting AGC‟s services along the network
either in their country only or for other regions as well. The threats with this group is
low budgets, family owned business (use traditional ways of promotion i.e.
advertising, marketing only) hard to evaluate PR benefits and the easy way out by
hiring internal PR manager. Alternative all these elements can turn into opportunities
by educating local customers of the value of PR services offered by an established
network with reasonable fees.
3.5 PORTER’S 5 FORCES MODEL
Assessing industry attractiveness
Intensity of rivalry is high because every agency is fighting for market share and the service
market is always a struggle of tenders and awarded projects. Competition is especially strong
within the market segments and within the player groups, while the market is dominated by
large players. Moreover, big players have developed different strategies by positioning
themselves as a one-stop-shop service for the consulting needs they might have. Therefore
they focus on long-lasting customer relationships and cross-selling opportunities, almost at
any cost, a tactic that AGC currently does but without a defined plan.
Threat of new entrants is high. A threat of new entrants into an industry depends largely on
barriers to entry. Specifically for the PR industry; entry barriers are considerably low, no legal
limiting regulations, need into fixed assets investments is little, forming agencies is quite
simple, growing entry trend of companies from outside this industry i.e. IT companies; surely
leaves no doubts of this threat for AGC.
Threat of substitutes is low. Although PR does not receive as much attention as advertising
and marketing, its role is increasingly important to organizations, because it fully support them
11
to influence public perceptions. PR discipline and activities cannot be replaced by other
communication methods and receive the same results. All three are interrelated and
compliment each other.
Bargaining power of suppliers is high. As already mentioned earlier, suppliers are the media.
This means that publication of articles and any other media coverage is depended on the
good intentions of the journalist whether they cover the story. Generally publicity is received
by maintaining „excellent‟ relationships with the media, because articles and news releases
are not paid. Media can turn the public‟s perception in a split second either positively or
negatively. One of the strongest advantages of AGC is the remarkable media relations it has
around the network, a guaranteed success factor – which must be maintained and enhanced.
Bargaining power of buyers is high. Almost needless to say how powerful customers are. The
growing emphasis from clients on ROI (Return-on-investment) is a major concern to the
industry. Switching ease allows clients to constantly press and push for lower fees. PR
industry needs to be more accountable by moving from wide coverage in media to more
precise and measurable coverage, which can be proven to affect the target audience‟s
attitudes and behavior.
Overall the PR industry being a younger one than marketing and advertising shows high
future growth margins attracting all kinds of players (from one-man show to international
corporations). In addition TV commercials are losing their charm – an opportunity for PR
agencies – therefore AGC‟s must create and deliver revolutionary and exciting ways of
communication while meeting the client‟s expectations for ROI.
A recent debate said: „The market for PR and communications professionals can only be
described as extremely healthy. A recent article in the Economist magazine (January19th,
2006), cites PR as „an increasingly vital marketing tool‟.
Fig.2 Porter’s Five Forces Model applied for Public Relations industry
12
•Established internationalplayers: one-stop-shopservice creating business leads•Fees war•Local ADV agencies offer PR services to existing Clients almost for free
l
•Switching agencies effortless process•Growing emphasisfrom clients on return-on-investment (ROI )•PR budgets almost always lower from Advert. & marketing
•Publication of articles depends entirely on thejournalist’s mood•Imperative to maintain excellent relationships withthe media•Negative media Coverage over night
•PR is cheaper/ supports/enhances - Advertising and Marketing•Increasingly role of PR•PR is a growing young industry•In-house PR capabilities do not preclude the use of an outside agency•Use of online-media grows
Threat of new entrants - HIGH
Intensity of rivalry - HIGH
Threat of substitution - LOW
Bargaining power of
suppliers -HIGH
Bargaining power
of buyers-
HIGH
•No entry barriers•Local ADV agencies develop dedicated independent PR departments•Smaller specialised consultants start to serve customers of all sizes•many companies from outside the consulting industry enter this market•Low capital investment
4. INTERNAL ANALYSIS
In this section we are going to analyze how AGC uses its resources and configures its
operations in order to develop services that meet market needs and create a competitive
advantage. In doing so we used the concept of Porter‟s value chain (1985), identified and
evaluated the factors of Mc Kinsey‟s 7S model, presented and translated financial data and
finally assessed AGC‟s distinctive capabilities.
4.1 VALUE CHAIN
AGC’s primary activities and supporting activities hold simultaneously core competencies and
vital linkages exist between them.
An outline of AGC‟s value chain is found in appendix 4.
New contracts being the primary source of operations, separated in retainer fee and ad hoc
contracts are the inbound logistics. International retainer fee accounts are the company‟s
strength; i.e. British Airways (BA) due to automatic renewal of contract every year for the past
13
30 years in 28 countries. Therefore AGC‟s power of servicing this client successfully for so
many years in so many countries has two positive effects: a) becoming a strategic partner for
BA thus making it costly for them to switch agency easily and b) enhances AGC‟s brand
name across the region it operates. Moreover ad hoc projects and other retainer fee accounts
remain a daily priority in securing existing clients and attracting new ones.
Operations include the pitching (preparation of offer/proposals) process until the contract is
signed. A major weakness used to be the preparation of these proposals only from a PR
perspective, neglecting the clients primary goal; that of increase in sales in general. The
recent introduction of dedicated new business team, is educating country managers in
presenting more „communications strategic‟ proposals. Further to brainstorming and creative
PR ideas, the need of addressing the client‟s sales targets is becoming the next competitive
advantage of AGC.
Outbound logistics include project implementation which is directly linked with service of
monitoring and evaluation. Both are powerful primary activities because are what the client
perceives as value for their fee. Results measurement of PR activities is not easy to prove to
clients; except with the number of cuttings and advertising value received. AGC maintains the
competitive advantage of high standard services; something that took years to build, evidently
very difficult to create or copy over night.
Marketing department never existed, because the core philosophy of the founder is that a
successful PR agency shouldn‟t be doing PR for itself. Indeed the company hasn‟t bought its
reputation. It was build via word of mouth effect by being among the top five PR agencies in
each country. Nevertheless modern times require more dynamic presence, thus the creation
of a dedicated Sales/ New Business team was necessary.
Next we are going to examine the supporting activities of AGC in order to have a full view on
the inside of the organization.
Firm Infrastructure - As mentioned in the stakeholders‟ analysis, AGC‟s directors and
founders are the controlling force who quite often „panic‟ and deviate from the long term
14
objectives; in an effort to achieve immediate results now. On the other hand, the core
competence (value) of the directors‟ skills and in-depth market intelligence is almost priceless
and should be promoted in any possible way.
Human Resource Management - In addition, human resources management does not seem
to be one of the company‟s priorities. Due to the fact that there is no HR department; the
accounts departments of each office deals with operational procedures such as payment and
compensation, insurance etc for their staff. Currently the directors are examining HR schemes
with the help of an external HR consultant, a promising fact.
Technology development – A large part of AGC operations is based on basic IT structure;
supporting its network on a 24 hour basis, keeping up to date with new technologies. None of
the less though, is all basic systems of exchanging information, while using as a primary tool
the emails. Automatically the whole system is unsophisticated. For example the accounting
process of the network is not streamlined creating additional work and duplicated effort
leading to high operational costs. Another example is luck of a global HR application allowing
the organization to reduce its efforts in managing its human resources. Ultimately the
company does not invest in IT systems to gain the competitive edge and enhance its primary
activities by realizing benefits such as:
Increase Value add to its clients
Increase knowledge share across the network
Allow employees across the network to jointly work on projects
4.2 MC KINSEY 7S MODEL
The main conclusion of the value chain analysis is luck of HR management procedures to
support the company‟s most valuable and profitable asset; its people! In an effort to have
better understanding we will use the Mc Kinsey‟s 7S model.
Hard S’s: Easy and feasible to identify
15
Strategy – Derived from VMOST, is well structured and detailed actually responding to the
external environment‟s challenges. Again the issue here is that strategy should be
communicated to the staff, thus winning them over and achieving desired results for the
Network.
Structure – The organizational structure of AGC could be characterized as flat. In fact the
directors are on top, followed by client service, finance and new business managers who
support the network from the H/O. Further down we have the country managers, their
department heads (only in big offices) and the executives. Career paths do not exist.
Systems – The formal and informal (basic) procedures support the strategy and structure. In
addition the flexible pricing policy and the well organized and effective new business team are
considered to be major strengths of doing business. Surely the systems could upgrade and
even become more sophisticated, thus creating an added value for the client.
Soft S’s: Hardly feasible and difficult to describe
Style (culture) – Dominant values are „lets make it for the month‟, while managers focus on
the day-to-day activities (to achieve unstructured targets) maintain a casual relationship with
their team members, failing to create enthusiasm, loyalty and serious involvement in the
company‟s objectives.
Staff – Absence of incentive schemes, internal career plans, consistent management training,
allow no room for high morale. It‟s imperative to introduce HR-systems to address these
issues, thus achieving one of the most important objectives; that of providing high standards
of service. Satisfied and well informed employees affect the company‟s positive performance.
Skills - The distinctive competences of AGC include multi-experienced and diverse
professionals who deliver creative and innovative PR ideas. Unfortunately high staff turnover
results in losing these professionals; an identified weakness.
Shared Values - Being a perception influencer company; is defined by integrity, transparency
and simplicity; shared and operating by values of AGC.
.
16
4.3 FINANCIAL PERFORMANCE
Since AGC is a family private owned company, access to financials is limited and not so
transparent. Therefore in this part of the analysis we will attempt to present some facts and
figures concerning financials in order to get a better understanding.
Five years ago AGC‟s financial position was not one of its strengths. The fact that the
company was making losses every year forced the directors to consider hiring a general
manager whose main responsibility was to shift the company from loss making to profits.
Today the Network is getting financially strong; however there are business centers which are
loss making currently and they represent 20% of the network operations. Gearing ratio is low
and the reason is that AGC doesn‟t use loans or large overdrafts to operate. Occasionally
cash flow becomes an issue due to collection cycle of fees from local clients, even though
most of the clients are international corporations who pay normally.
Impact of retainer fee clients on AGC’s revenues:
The major international retainer fee client represents 36% of AGC overall revenues which
could be both a positive and negative fact. Positive because specialization and in depth know
how of a client makes AGC a strategic partner for life, while should an international client
decide to leave the agency this could have a negative impact. Therefore the balance between
costs and income needs to be enhanced by more retainer fee clients – focusing on network
accounts - thus creating economies of scale with the existing infrastructure.
17
In Fig.3 – Normal Distribution Graph demonstrates the impact of retainer fee clients. To get a
better understanding of the revenues we have separated the extremes in retainers by
excluding the low end (low fee accounts) and the high end (premium fee accounts) to
calculate an average realistic fee (global retainer), which is derived from the volume of
revenues. This method helped to set feasible and realistic targets for 2006.
Fig.3: Normal Distribution Graph
• Action Global PR Revenues 2005
• Fees €180,135*12 = €2,161,620
– 11 accounts
• 36% Revenue from BA
Average Global Retainer €10,000
Premium A/Cs
BA
OMV
Network A/CsMerloni
Siemens
NEC
Visit Britain
CTO
Goodyear
BAE
Low A/Cs
Act. Egypt
Savoy
€25,000 +Less €5,000
5. SWOT ANALYSIS AND CONCLUSIONS
5.1 SWOT ANALYSIS
In the table below are included all the outputs from internal and external analysis. The ranking
for the strengths and weaknesses that were identified in our internal analysis was based on
the strategic importance that each one of these factors has for the organization now and in
18
the future. Additionally, for the opportunities and threats the prioritizing of the factors was
made according to their occurring probability and their expected impact on the organization.
Strengths Weaknesses
1. Strong network – Brand name
2. High standards of service
3. Creation of dedicated New Business
department
4. Multi cultural professional employees
5. High profile long term clients
6. Flexible pricing procedures
7. Excellent media relations
1. Human Resource Management
2. VMOST is not communicated to
employees
3. Financials – regular cash flow problems
4. Basic technology is used
5. 7S linkages
6. Lack of inspiration from the directors
Opportunities Threats
1. Expansion of European Union
2. Development of own network
3. Operation in emerging and booming
markets
4. Global trend of innovative ways of
promotion ie PR activities
5. PR market is a healthy one
1. Intense competition from local agencies
and multinationals
2. Entry in PR market of companies outside
the consulting industry
3. Smaller specialized consultants start to
serve customers of all sizes
4. Low capital investment, specially in
emerging markets
5.2 CONCLUSIONS
The company being in growth state has two promising assets, its network in emerging and
booming markets and multi cultural professionals offering high quality of service which can
place AGC within the next ten years as the market leader. Looking forward is beyond a doubt
that a number of challenges lie ahead, especially when current globalization trends are taken
19
into account. Unfortunately not all local units survive following periods of turmoil. Moreover,
since the global scene is delicate and unpredictable; at any given moment big players could
open offices in the markets AGC operates and become dominant players. Therefore each
business unit must be competitive and become profitable in it self. Thus becoming the market
leader in the specific country, resulting to sustainability and security, while implementing HR
schemes to motivate employees and keep them on board.
6. RECOMMENDATIONS
To sum up, the following are the main recommendations for AGC‟s strategy:
Communicate strategy to staff to create sense of acceptance and ownership and
motivate them by applying incentive schemes and offering valuable job benefits.
Through continuous environmental scanning and analysis of Porter‟s five forces
model use the existing market position to control suppliers power, to be a step ahead
of competition and new entrants and to fulfil clients expectations, thus lowering their
bargaining power
Focus on high standards of customer service through efficiency and ROI measurable
results. These will in turn lead to lower operational costs and increased profitability.
Implement New Business Plans both for short and long term in a structured,
consistent and defined direction way. Stop acting „in a panic‟ to achieve short term
results.
Each business unit to become top player in their market by acquiring big local clients
Create new working-styles and corporate cultures that are attractive for more
entrepreneurial-minded people, and actually keeping them
Enhance network alliances to increase range of services offered through cooperation
with other agencies
Concluding our analysis, we would recommend AGC‟s top management team to evaluate the
linkages within the mission, objectives and tactics focusing at the same time on the linkages
within the 7Ss and investing not only in expanding its network and technological development
but also to its most valuable asset, the human capital.
20
7. REFERENCES/BIBLIOGRAPHY
Action Global Communications Internal Reports, 2004-2005
Johnson, G & Scholes, K (2001) Exploring Corporate Strategy, 6th edition, Prentice Hall
Porter, M E (1980) Competitive Strategy: techniques for analyzing industries and competitors,
The Free Press
Porter, M E (1985) Competitive Advantage: Creating and Sustaining Superior Performances,
the Free Press
Peters T., Waterman, R. (1982) In Search of Excellence, New York, London: Harper & Row.
http: www.actionprgroup.com
http: www.ft.com
http: www.hbr.com
21
8. APPENDICES
APPENDIX 1 - VMOST
Vision Analysis/Implications/Discussion
“AGC aims to make the public relations tool, the lead discipline in the communications mix for the region it operates; because public relations have the immediacy and transparency to build credibility and trust.”
AGC„s recently designed vision portrays a dynamic and ambitious big idea on behalf of the company. In some countries, this can be achieved quite easily, in some already it has and in some it may never be the case. Action operates in emerging and multi-cultural countries; therefore the complexity and unpredicted evolution – of the region - combined with many unknowns are a challenge for the company. The tool of „Advertising‟ is the major competitor against this idea, which nevertheless tends to lose budget amounts every year. Therefore, the vision statement needs to be effectively communicated among the network in order to promote this idea, internally and externally.
Mission Analysis/Implications/Discussion
“To be universally recognised as the most effective and creative public relations consultancy throughout the regions we operate in, building lasting relationships between our clients and their stakeholders.” Core organisational values:
Engage credible sources of information
Cut through the information overload to something meaningful
Maintain excellent „Media‟ know-how
Offer creative and innovative experiences
Employing pioneering spirits
Personal and professional integrity in daily activities
To understand global and local trends : „movers and shapers‟
A thorough and explanatory mission statement which mirrors the purpose and ways of operation. The issue again is that neither Vision nor Mission is effectively communicated in the Network, a fact that disorientates people. Although both statements are well written, they lack commitment by the employees who need to be inspired by the directors of the company, in order to secure more clients. Unless the unity of the network is „fused‟ to its staff, thus creating a snowball effect of passion and loyalty, AGC will not be able to make great advances under these conditions.
Objectives Analysis/Implications/Discussion
Increase market share – new accounts - in existing markets of operation by 3-5% by the end of 2006.
Increase value add services leading to an increase in revenues from existing accounts
Improve cash flow by
It seems that the objectives set for 2006 meet almost all elements of the „SMART‟ analysis, by being specific, measurable, achievable and realistic. The agreed part remains a bit foggy due to lack of commitment and effective communication among the network. The major concern remains the immediate improvement of the is cash flow, which will be quite hard to positively influence in all
22
controlling costs and capital management cycle process.
To operate by the slogan „Think Globally, Act Locally‟
markets. Evidently some markets will be a feasible task while in others a strong challenge, therefore the company should focus pressing and supporting the big offices first. With regards to the – slogan- service offered, this shouldn‟t be a problem at all, since this is the competitive advantage of AGC against other PR agencies. Local know-how and excellence of service offered is the strongest advantage. Provided the „network engine‟ focuses on them immediately, actual results could be achieved soon. Since the objectives are simple and straightforward make things easier.
Strategy Analysis/Implications/Discussion
“For AGC the way to move forward is by generating new business for the network constantly, delivering high results and seamless service to the clients, encouraging them to remain with us. To achieve this we will : a) Use Door Opening Tactics b) Apply Focus and c) Concentrate in the Big Picture”
Evidently the AGC clear cut strategy targets and focuses on the main challenge faced by the company – which is to acquire the soonest new business, resulting immediate improvement of its financial position. The strategy is a three faced one and addresses both short and long term goals. Therefore the reasons for emphasizing on New Business are increased costs and risks which resulted from the past 5 year‟s rapid expansion and investment moves in the Network. Further to this, in order to achieve short term goals of gaining 3-5% market share in 2006 in operating markets, the existing infrastructure must generate the additional growth.
Tactics
Analysis/Implications/Discussion
Door Opening Tactics – 1. Focus on Small Medium Enterprises on the brink of expansion. 2. Use off-the-shelf Modules
Apply Focus – 1. Business as usual, maturity. 2. Work on the internal mission 3. Develop a centre of excellence that will demand over and above market rates
The Bigger Picture – 1. New local affiliations for each country 2. Enhance existing AGC affiliations 3. „Stealing‟ Multinational accounts
Cleary the every day tactics support the strategic plans and if implemented effectively by the managers of the agencies around the network, actual results could be produced within reasonable time. Nevertheless though, implementation of these tactics requires the commitment of each agency‟s manager in attracting new clients, and again this is another challenge for AGC. The company designs and delivers Public Relations services. Therefore its managers are NOT sales people and hiring a sales person for each agency is not an option at this stage. In plain words we would say, that the tactics are well designed but implementation is hanging on thin air. Unless a powerful motive scheme, intense education and commitment from the directors are set in motion immediately, the whole plan could face great difficulties moving forward.
(Source: Action Global Communications Business Plan for 2006 - 2008)
23
APPENDIX 2: STAKEHOLDERS ANALYSIS
As a first step we have divided stakeholders into two groups:
Inner circle :
o Owners who are the founders and current directors
o Human capital (management + employees),
o Suppliers -for AGC‟s case is the media ( print, tv, radio, internet sites),
o Clients ( multinationals and local companies)
Outer circle:
o Competitors( PR agencies, Advertising agencies, Internal departments)
o Public
o Government.
Overview of the key-stakeholders is presented below.
Stakeholder Power Interest Expectations met/satfied?
Objectives
Internal
Directors High High YES – so far but to move forward, need to stay focus on VMOST elements
Growth - Expansion plans Profitability Strategic freedom – PR agency of choice in the region High performance Enhance reputation Family motives
Management
High
High NOT to an acceptable degree to secure loyalty Need motivation and trust from owners
Personal motives Operational freedom High salaries – attracting competent country managers Support from H/Q
Employees
Moderate
High NOT really. Fear for company‟s future. Need to share VMOST as to make them feel part of AGC team!
Salary and job security Job satisfaction Great service supports customer retention, leading to bonuses and pay rises
24
External
Clients High High
YES in most cases. Need to sustain HIGH levels of service and keep flow of innovative ideas going
Value for money service Fee VS Publicity value Competent and efficient account managers representing them Generation of business opportunities where possible Positive word of mouth effect at high levels Proud to be represented by AGC
Suppliers ( Media)
High Low ABSOLUTELY
Credible flow of information to the media – AGC is a trustworthy source WIN- WIN relationship maintaining excellent relationships with them Anticipate their needs 24/7 contact with AGC people‟s Media are our „friends‟ Positive influence on behalf of our clients
Competitors High Moderate
NOT all of them. Need to focus on differentiation elements
Enhancing competitive advantages Close monitoring „Steal‟ multinational clients Securing niche markets
Public High Moderate
YES – maintain positive reputation of AGC by being transparent, innovative and ethically correct.
AGC to deliver trustworthy news and information on behalf of its clients Create innovative communication plans to impress and positively influence perceptions
Government Moderate
Moderate
YES – pay taxes and keep the books legal
Abide by local laws „Friends‟ with local authorities Taxes paid on time Transparent accounting procedures Effective lobbying
APPENDIX 3: PESTLE FRAMEWORK AND ANALYSIS OF MOST IMPORTANT EXTERNAL
INFLUENCES
25
Political
o Expansion of EU
o Middle East Governance
o Government Changes
o Taxation Policy
o Terrorism/War
Economic
o Business Cycles
o Intense competition
o Tendency for tight budgets
o Exchange Rates
o Interest rate risks
o Money Supply
o Inflation
o Unemployment
Socio cultural
o Population Demographics
o Language and cultural differences
o Income Distribution
o Social Mobility
o Lifestyle Changes
o Attitudes to Work and Leisure
o Consumerism
o Levels of Education
o Global diseases
Technological
o Speed of Technological Transfer
o New Discoveries / Development
o Government Spending on Research
o Government and Industry Focus on
Technological Effort
o Security measures
Environmental
o Environmental Protection Laws
o Waste Disposal
o Energy Consumption
Legal
o Monopolies Legislation
o Employment Law
o Health and Safety
o Product Safety
HENLEY MANAGEMENT COLLEGE
FOUNDATION OF MANAGEMENT ASSINGMENT: Lannet Communications
26
ACTION GLOBAL
COMMUNICATIONS
PESTEL ANALYSIS
FACTOR External influence Threat / Opportunity Explanation
POLITICAL EU expansion and economic growth in some regions
O = high impact
AGC operates mainly in EU's emerging markets therefore huge and numerous opportunities for growth;new markets for existing clients and prospects for potential clients
War / terrorism T = high impact
Depending on the location of a war and the nature of terrorism ( Sept. 11), a temporary downfall of economy is created. Evidently PR services are the least of the people's worries. SOLUTION: Be flexible within the operating country, maintain a NEUTRAL position regarding Politics.
Government Changes
T = High impact/ O = High impact
Every country has its own laws and regulations, despite belonging in EU. As for the Middle East region, monarchy is a totally different game where is important to be friends with the ruling family.
ECONOMIC
Intense Competition T = high impact
Unfortunately the game is not fair. Advertising agencies tend to offer PR services on the side - some time for free. This means devalue of the PR tool and bad practice. Takeovers to increase market share. SOLUTION: Close monitoring of competition moves. Anticipate moves where possible and act proactively. Offer consistent high levels of service and acquisition plans when is feasible and at a reasonable price
HENLEY MANAGEMENT COLLEGE
FOUNDATION OF MANAGEMENT ASSINGMENT: Lannet Communications
27
Business Cycles
T = High impact/ O = High impact
Primary goal of organisations ( unless not-for - profit) is to make profits.regardless of other external or internal influences, a means of promotion will always be important. Therefore in hard times, advertsing budgets decrease and PR ones increase; while in good times both benefit. SOLUTION: Take advantage of current trend of decreasing Advertising budgets and investing in alternative ways of promotion ie- innovative pr campaings.
SOCIAL Language & Cultural differences
O = high impact
Local know how under Global thinking. Being a network operating in so many different markets by using local staff reporting to H/O is a solid competitive advantage which creates LASTING relationships
Lifestyle changes O = high impact
Core line of business of AGC is reputation management, which means it can adjust client campaings accordinlgy due to multi culture countries expertise
Global diseases T = low impact
Eventhough SARS, cow flu, bird flu etc are negative issues around the globe, for AGC could generate new business for PR campaings. ie Objective : To promote Dubai as a travel destination! It is a safe destination no bird flu cases!
Level of Education T = High impact
Competenet high caliber personnel is hard to find, let alone to keep. SOLUTION: AGC has two issues to consider: 1) Create attractive job benefits 2) Focus and Invest on current key people as not to lose them
TECHNOLOGICAL
Information management
T = High impact/ O = High impact
For a PR network Information management is crusial in delivering excellence of Services. Keeping up with technology involves Increased costs & Employee Special Training. Competitors who are leaders in Technology have the upper hand. SOLUTION : Since Information Technology is a means of competitive advantage ( Porter:1985) - keeping up to date with the latest trends in IT and market trend makes the difference.
HENLEY MANAGEMENT COLLEGE
FOUNDATION OF MANAGEMENT ASSINGMENT: Lannet Communications
28
ENVINROMENTAL Environmental Laws O= Low impact Depending on the clients needs these laws usually request Public Affairs services, thus more business for AGC
LEGAL Laws in general T = Low impact
Various laws in various countries have a negative impact on clients public image and line of business meaning the PR agency cannot offer them its services or only at a limited degree.
HENLEY MANAGEMENT COLLEGE
FOUNDATION OF MANAGEMENT ASSINGMENT: Lannet Communications
29
APPENDIX 4: AGC VALUE CHAIN
Support activities
Organisation infrastructure: Directors, Country Managers,
monitoring systems, finance, quality
Human Resource Management : Incentive scheme, Job benefits
IT Management: Development of IT processes and systems
Procurement: Business Partners ( catering services,
photographers, venues, translators etc)
Visibility / Public Relations
Inbound
logistics: Funding (budget)
Operations:
Project
design, tendering, contracting
Outbound
logistics:
Project implementati
on
Marketing & Sales:
Brand Value, Network power
Service:
Project
monitoring, evaluation follow up
Primary activities
Valu
e for
Bene
ficiar
y