320 EMM: Manufacturing Business Organisations

Coursework 1 – Report: JC Decaux

SID: 2880811 Year: 2010

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Background to the company

The company JC Decaux was created in 1964 by Jean-Claude Decaux who also invented the concept of “street furniture”.Nowadays, the company became a famous worldwide group which is acting in the 3 different outdoor advertising markets:

Street furniture: Sanisette public toilet, Bicycle sharing systems and bus shelters (market size : 37 countries)

Billboards (market size : 28 countries) Transport advertising: It includes advertising on different transports such as

planes, buses, tramways and metros, but also in airports and train stations. (market size : 19 countries)

All over the world (55 countries which represent more than 3400 cities of at least 10000 inhabitants) the group employs 9250 workers. Over the years the company has grown considerably, in fact, after mergers with many companies of the outdoor advertising JC Decaux is now the number 2 outdoor advertising worldwide company.

Since its creation in Lyon, France, JC Decaux remains being a family-run company. Indeed, the Decaux family currently owns more than 75% of JC Decaux shares.

JC Decaux is a B2G (Business to Government) and B2B (Business to business) group. Its turnover is geographically divided as flowing:

France: 28%; UK: 14,3%; Rest of Europe: 36%; North America: 7,3%; Others: 0.9

Goals

Main purpose of JC Decaux is to expend over the outdoor advertising market, in fact the group is the number 2 of the market right after the leader “Clear Channel Outdoor” In order to reach the leader place the group has to tap into as much as possible markets. The outdoor advertising market is atypical, there are few available contracts, but they are substantial. That is why it is so important for JC Decaux to find opportunities which are surely not on full markets.

Product life Cycle

JC Decaux has a wide range of product, all over 3 different market of the outdoor advertising.Street furniture products have a long life cycle, actually once the product is launched it already has been tried and appeared as successful. Street furniture has to be part

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of the city, whatever the product is. Consequently, sanisette public toilets, or bus shelters for examples, have been used for decades, unless there are no major innovations the situation will remain for those two products. They are at their mature stage on equipped countries. On the contrary, Bicycle sharing systems also known as “Velib” for the city of Paris, are at their growth stage, JC Decaux can see its sales growing, new customers on new markets, but it also see new incomers, and competition is appearing.

Concerning billboards, JC Decaux has always been selling it, thus this product life cycle is as long as street furniture are. However, the installation of billboards has decreased over the past 20 years as a consequence of several laws limiting the quantity of billboards in cities, and also forbidding advertisement of some products. Billboards are reaching their saturation stage in many countries, which mean that sell are not growing anymore, they even tend to stabilise.

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Marketing/Product Analysis

The group JC Decaux has a lot to care within its leaderships. The company culture is based on employee’s professionalism and their ability to do their best for the company. Keeping its currents leaderships is the real target of the company. There is a stake, in fact the outdoor advertising market is not comparable with traditional ones, there is a huge lack of customer’s offers and companies have to find ways to make their market shares grow.

Values

As we can see on JC Decaux website, the company wishes to respect values, they are listed as following:

Quality:”to create within the Group a stimulating corporate culture”

Keeping our word:”Doing better than our contractual obligations is one of the key values of our Group.”

Openness:”fundamental principles enabling the Group to preserve and expand the capital of trust it enjoys. ”

Outdoor advertising market

After the economy crisis of 2008 which made the advertising sector crash down, 2009 has been hard for JC Decaux and its turnovers decreased:

Anual turnover 2008 (m€) 2009 (m€) Growth (%)Street furniture 1 063.5 934.3 -12.1

Transport advertising

629

589.6

-6,3Billboard 476.1 394.9 -17.1

Group total 2 168.6 1 918.8 -11.5

The transport advertising remain thriving, its loss of 6,3% shows how much JC Decaux has been strong and resisted to this market crisis. However, billboards and street furniture have a loss of more than 10% (-17,1% and -12,1% respectively).

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According to Jean-François Decaux co-director of the group, 2009 has been the hardest year for the group since its creation, this is due to a reduction of advertising budgets.

Turnover evolution by geographic location:

Annual turnover 2008 (m€) 2009 (m€) Growth (%)Europe (without UK

and France)781.4 650.9 -16.7

France 617.6 563.7 -8.7Asia Pacific 322.4 300.9 -6.7

United Kingdom 246.8 183.8 -25.5North America 156.4 146.2 -6.5

Rest of the world 44 73.3 66.6Group total 2168.6 1918.8 -11.5

Analysis these data, the only positive growth is the rest of the world. The meaning of this result is that JC Decaux has successfully extended itself. With a growth of 66,6% the result is completely encouraging for the group. In the contrary, other results are negatives due to the crisis.

JC Decaux has two mains competitors in the outdoor advertising sector:

Clear Channel and Viacom.

Those 3 companies are currently sharing 30% of the market shares, rest is little companies.

Positioning

World leader in street furniture (428,000 advertising panels) World leader in transport advertising (380,200 advertising panels, present in

more than 165 airports and 300 contracts on metros, buses, trains and tramways)

European leader in billboards (230,500 advertising panels, 3000 cities in 30 countries)

World leader in outdoor advertising in Asia Pacific (201 700 advertising panels in 44 cities)

World leader of bicycle sharing systems The group is the number 2 worldwide of the outdoor advertising

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Green marketing

In China the group has been associated with the WWF for a marketing campaign about plastic bags and the use non toxic bags.

Another example of green marketing in Marseille: JC Decaux in association with the town of Marseille and Credit Agricole bank created a “vegetable wall” it is up to 10 meters.

Another example of green marketing from the group is in Chicago, indeed, the group offered to the town ecological solar powered bus shelters. They are advert-free because of the power needed to illuminate the ads.

Those example of green marketing all around the world show that JC Decaux is determined to communicate around ecology and place itself as an eco-friendly company in customers mind.

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Competitor analysis

PESTEL

This PESTEL analyse of the group JC Decaux will help to understand how the group is affected by it macro-environment:

Political factors:

Advantages DrawbacksPolitical barriers

Economic factors:

Advantages DrawbacksAdvertising is nowadays an important factor for any company, the sector is growing more and more each day.

Contracts are very profitable and in average are up to 15 years.

The economy crisis of 2008 has greatly reduced advertising demand.

Few contracts

Social factors:

Advantages DrawbacksUrbanisation is growing, moreover the world population is considerably growing.

Technological factors:

Advantages DrawbacksJC Decaux has a great R&D and is always part of the pioneer

Internet and its many ways to promote.

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Legal factors:

Advantages DrawbacksRules and laws against billboards, or aiming to reduce their amount.

This PESTEL analysis clearly shows how much the macro environment is strongly affecting the JC Decaux group. Actually, the group had to face the economical crisis of 2008 (JC Decaux saw its benefits lowering of 51,5% in 2008). For the first time of its history the group had to face a negative growth of its turnover.Above this economical crisis, which almost company suffered from, the group is benefiting from advantages such as the growing world population and a high urbanisation.

SWOT Analysis

Strengths

Global Present in 43 countries around the world 34 of 50 largest European Cities

Maintenance Services Two-thirds of street furniture employees clean and upkeep

ads Strong Start in the North American Market

Many contracts in malls and cities Wins majority of contracts it bids for

Won 86% of the public bids attempted for new contracts and 83% on existing contracts

Sophisticated database allowing detailed analysis of target markets in certain areas.

Major Innovative leader of outdoor furniture

Weaknesses

Centered in Europe Many contracts are ending.

Has to invest to reacquire contracts Procedural problems make posting advertisements throughout

the world difficult and varied. Must find ways to cope with different scenarios

Does not own the land which holds “furniture/billboards”

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Have to deal with price changes Chance to lose property to development

Strength of Euro vs. USD

Opportunities

Expansion in North America: More placement in major airports Large markets More people taking public transportation

Win upcoming contracts to control more of the market Utilize joint-venture with Viacom to expand company’s market Expand into Asia Pacific and Latin American regions, where

street furniture is just beginning to take hold Patent new innovations and sell to other companies Can expand into more subway stations within North America

Threats

Clear Channel Largest operator of media in US

Viacom Inc Leading global media company

Patterson Outdoor

Loss of major contracts in upcoming years Regulation from governments

Especially in France Losing quality of advertisers Problems acquiring other outdoor advertising companies

Past problems with Minister of Economy of France and their external growth

o May fall behind other companies Large retailers being allowed to advertise on television across

borders within the EU. Hurts business from large retailers whom advertise on

their billboards.

At first sight JC Decaux seems to be well implemented all around the world, however, there is a huge gap in the North America market even if the start is working well actually. The group has to tap into new national markets, furthermore, in a first step to reinforce its currents markets such as UK which are not fully completed and with

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lot of resources. Keeping in mind the strong competition which is trying to get contracts over JC Decaux.

Porter’s 5 Forces Model

The bargaining power of supplier (Moderate)

Private Land (Billboards) Not a large amount of suppliers- need a specific areaHigh supplier

power concerning lando High Supplier Regulations

Must purchase land (cannot substitute) with something elseChoose Partners that adhere to ethics and quality standards

The bargaining power of customers (High)

Several major international companies to choose from Extreme Competitive bidding done by suppliers to gain clients

o Suppliers place large investment in competitive bidding Governments with huge contracts

The threat of substitute products (Moderate)

Threat of Cheaper Products

JC Decaux sells premium quality products for a high price Outdoor advertising has many options for new products

o Easy to duplicate outdoor advertising and other advertising in other forms

Possible Development of new technology by competitors to decrease costs

The threat of the entry of new competitors (Moderate)

Moderate Threat of New Entry Many contracts are ending

Barriers to Entry

Outdoor advertising market (Street furniture, Billboard and transport advertising)

Government Regulations which JC Decaux suffer from. Ownership of concessions

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o Advertising network in key citieso Attractive to large advertisers

Contract Biddingo Requires important investments

Outdoor Furniture market

Innovations for audience measurement Obtain Database to analyze social and demographic characteristics of

areas Provide Maintenance Service

Billboard market

The group has exclusive market rights of its developed new technologies

The intensity of competitive rivalry (High)

Huge amount of competitors:

JC Decaux, Viacom and Clear Channel, the world top 3 companies have 30% of the market shares

Several International companies that operate in the 3 sectors Antitrust regulation: Prevent JC Decaux from new acquisitions

According to the Porter’s 5 forces analysis, 2 of the 5 forces are highs, the meaning of this analysis result is that JC Decaux has to take care about its competition and its customers. In a strategy mind, it results on acts that lead to reinforcement of the market shares and satisfaction of customers.

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BCG Matrix

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As we can see on this table, 3 mains product of JC Decaux are “Cash cows”. Those products are very profitable but it is now hard for the group to tap into new markets and find new opportunities so their growth is low. The group is ensuring the continued existence of those products, trying to improve the quality, the usefulness, with its Research and Development staff.

Whereas, JC Decaux sharing bicycle systems are “stars” product, as far as they will remain world leader, and see their growths increasing. Those systems are currently shared by two companies, JC Decaux and the American group Clear Channel. The Cyclocity system from JC Decaux is already in 60 cities all over the Europe. JC Decaux aims to expand this product over Europe and to lead the sharing bicycle system market.

Strategy

Strategies used by the group JC Decaux aim to fulfil the group goals and objectives, in fact the group wishes to gain market shares over its competition and to tap into new markets to become again the Outdoor advertising leader.

This is the two mains strategy the group is currently holding:

Merger and acquisition strategy

Since its creation in 1964, the group has grown fastly. Actually aiming to lead the outdoor advertising market, the group is applying a merger and acquisition strategy in order to get as much as possible market shares from acquired companies and to get their know-how. JC Decaux is benefiting from the weakness of its competitors to buy them, the recent examples of the German company Wall AG, and the the English company Titan Outdoor UK in the beginning 2010 (the acquisition of Titan Outdoor UK will lead to a growth of 4% of JC Decaux market shares in UK: from 25 to 29%)This merger and acquisition strategy always has been part of the company. Another forceful example is situated in 1999 when the group acquired Avenir the European leader on billboards and world leader of advertising in airports. This is how step by step the company has developed itself in the huge powerful group it is nowadays.

Diversification

The other strategy JC Decaux is focusing is its diversification. The group is currently on 3 different markets of the outdoor advertising, it is actually the only company present on every market of the outdoor advertising. It has always been an objective to be recognized as a real actor of this market. Furthermore, diversifying for JC Decaux is helping to grow its amount of potential customers.

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Innovation

Finally, the innovation strategy, such as the merger and acquisition strategy has always been part of JC Decaux. Since the creation of the famous “Abribus” (bus shelters) in 1964, the group is trying every day to innovate and to be pioneer on any new products.Its R&D is powerful and has a very important place within the company, the group entered stock exchanges in 2001 which permitted to have a better capital and to invest on R&D.All over the world, there are design studios where 110 engineers are looking for innovations and solutions in order to satisfy as much as possible customers’ needs.

Conclusion and recommendations

Recommendations

If we do not consider the 2008 crisis, the group would surely be with a positive growth of its turnover, however the crisis made the advertising market fall down dramatically. In my opinion, the strategy is working well, furthermore the company remain a leader of the advertising innovation and is keeping its notoriety which is an important factor of its success. The group has its chances on the North America market, it is actually taping well this market, but the South America is not under control, and there is not yet notoriety of the company there, thus the group has to apply its strategies to tap into this market. In fact, it could use the merger and acquisition strategy within South America market so it would result on increasing market shares and the creation of its notoriety.There are others ways to tap the South America market such as using another of its strategy, any innovative product would open market doors to the group.

Way before looking for new customers, the group has to strengthen its actual geographic market: the first step of this objective is done, with the new European acquisitions earlier this year, Asian market has to be the second step of this objective.

To conclude with recommendations, JC Decaux strategies seem to work perfectly, this is why it has to continue over the future of the company, diversification and innovation are two mains keys of the success within the Outdoor advertising Industry.

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Conclusion

To put it into a nutshell, the group JC Decaux is very successful. In its 56 years of life, the company became a worldwide actor of the Outdoor advertising market. The group will celebrate soon its 10 years of presence in the stock exchanges, it will remain anyway a family-run company with more than 70% of JC Decaux shares possessed by family members.Competition is becoming hard, and its amount is now important. The control over competition will be on the future of the group the more important problem to solve.

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Sources

http://www.google.fr/url?sa=t&source=web&ct=res&cd=3&ved=0CBEQFjAC&url=http%3A%2F%2Fwww.radiobfm.com%2Fedito%2Finfo%2F46418%2Fjcdecaux-revendique-une-hausse-de-sa-part-de-marche-%2F&ei=vMpqS86NN8yTjAfTwODqBg&usg=AFQjCNEWYBAjYMkQsx819npTcFNFpX3x7w&sig2=KeUVozLI0er7hUPmO--fKg

http://www.mediabuyerplanner.com/entry/38182/jc-decaux-builds-solar-powered-bus-shelters-for-windy-city/

http://www.jcdecaux.com/fr/Presse/Archives/2010/JCDecaux-Chiffre-d-affaires-2009-en-baisse-de-11-5-a-1-918-8-millions-d-euros.-Recul-du-chiffre-d-affaires-organique-limite-a-4-9-au-quatrieme-trimestre

http://www.mediaweek.co.uk/news/895234/?DCMP=ILC-SEARCH

http://www.jdf.com/tendance-valeurs/2010/01/23/04010-20100123ARTHBD00083-jcdecaux.php

http://www.strategies.fr/etudes-tendances/tendances/r27060W/jcdecaux-guette-le-reveil-du-marche.html

http://www.strategies.fr/etudes-tendances/tendances/r20090W/jc-decaux-s-affiche-en-bourse.html

http://www.e-marketing.fr/Marketing-Magazine/Article/JCDecaux-renforce-son-leadership-europeen-7115-1.htm

http://www.lerevenu.com/depeches/news/jc-decaux-presente-ses-nouvelles-offres-2010.html

http://www.latribune.fr/bourse/20100128trib000468198/jcdecaux-le-chiffre-d-affaires-a-recule-moins-que-prevu-le-marche-apprecie.html

http://www.capital.fr/bourse/actualites/jc-decaux-remporte-un-contrat-publicitaire-a-dubai-326716

http://www.jcdecaux.fr/

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