Business Environment Simulation

Strategic Analysis of the WRSX Group

Your Strategic Analysis of the WRSX Group should include the following sections:

Mary-Jo Williams R00165003

Miten Kathiriya R00224487

Stella Onarotena Kolawole R00223652

Summary
With headquarters in Paris, New York, London, and Singapore, the WRSX group provides its goods
and services to business clients all over the world. The worldwide advertising and communication
organization was established 15 years ago through the combination of three agencies (WRSX, 2021).
Today, despite the fact that the company appears to be established, it is faced with a variety of
strategic problems that hinder its stability and expansion. This report's goal is to provide a thorough
business strategy to determine whether WRSX can be preserved, reorganized, and taken into the
future given that it is now unable to take advantage of environmental opportunities.

Strategic Position

 Environment.
 Purpose.
 Culture
 Capability
1. The environment

The environment can be analysed using ‘ The PESTEL Framework’ , ‘The Five Forces Framework’ ,
and ‘Types of Industry’.

These are essential to include - PESTEL (MACRO environmental analysis) needs to be assessed for
the external environment, we are assessing the opportunities and threats so that we can find out where
are we now and make a plan where we want to be and how we want to get there

Porter's 5 Forces (INDUSTRY environmental analysis)

Entry barriers - Government regulation, brand loyalty, economies of scale, cost advantages

To do: Divide PESTLE analysis amongst group members

PESTEL Framework

Political - Many WRSX clients have relocated or will relocate to Asia due to the strict and
rigid legislation in Western Europe and the United States. Despite the rigorous privacy laws
relating to personal information, the regulation of access to the internet and the availability of
networks create radically different conditions.

Economical - Mary-Jo

A period of sustained growth.

There is a rule of thumb in the advertising industry that ad spend follows any rise or fall of world
GDP. However, the pandemic has caused people to rethink this which has led to an immediate drop in
ad spend

Reductions in revenues in various countries but that is set to change over the next 12 months

Marketing budgets are first to be cut in a downturn, there is an economic downturn pending Govt. Ad
buys to promote public health campaigns during covid a positive thing.

Losing existing clients and failing to attract new clients is very risky.

Changes in the regulatory and legal environments pose a challenge.

Social - Melvin Thomas the ageing populations, particularly in Europe’s are individuals who are also
more eager to spend more and have more purchasing power. This pulls companies' attention away
from the new-age digital media and towards conventional advertising tools since these consumers are
still drawn to conventional advertising.
It is impossible to ignore the internet, the increasing general acceptance of new technologies and
services particularly among the younger generations, there are emerging markets in Asians and
Africa as a result of the adoption and expansion of e-commerce and company websites, which open
up the new avenues for luring new customers or retaining old ones.

Technological - Miten Kathiriya

● Development of new transferring and data technologies

● Security issues.
● Software applications developed for mobile and fixed devices technology.
● Continuing of use of the internet
● Rate of adoption of new services and technology

Environmental - Miten Kathiriya

In particular, ecommerce and business websites are accepted and growing. Changes to employment
laws, salaries for freelancers, and competition laws are also taking place in the particular countries.

Legal - Mary-Jo

The rise of CSR

CSR is mandatory in majority of companies nowadays and major corporations produce annual reports
along with their financial reports

Divide Porter’s 5 Forces

1. Threat of new entrants. - Miten Kathiriya

Every day, new businesses are being created based on new technologies that enter the
marketing, media, and information technology sector. Even so, WSRX has a cost advantage
compared to new entrants because the longer a company has been in the industry, the greater
the cost advantage. Furthermore, the risk of new investment is lower than the risk of a new
entrant.

2. Bargaining power of suppliers - The Non-financial Performance Measures (NFPM) indicate

that WRSX Group´s suppliers have significant bargaining power.WRSX Group receives a
score for procurement and supplier management that is significantly below the industry
 average. WRSX operates poorly because it organises production buying inappropriately and
doesn’t establish and take advantages of strong relationships with suppliers. This indicates
that WRSX lacks the power to sway the businesses that supply it.
3. Rivalry among competitors - Melvin Thomas.

The industry structure is changing. As a result of continued industry diversification, there is a new
trend that ‘ big global clients don’t need big global agencies anymore’. This is followed by the growth
of non-traditional agencies in worldwide markets. Although this is a revolution, WRSX could fall
victim to this trend as there is growing evidence that emerging clients are moving away from large
advertisement agencies. The advertising world is also witnessing another change in terms of
compensation. Many big corporate entities are moving away from compensation based on billable
hours to compensation based on results achieved. This could result in severe competition among the
various advertising agencies throughout the world. Another important thing is the consolidation of
market by global agencies through acquisition. This will directly impact WRSX and will create more
competition unless we respond with similar strategies. Companies such as Google, Microsoft, Yahoo,
Baidu and Bing also pose significant competition to traditional advertising agencies in the digital
marketing sector through their ability to interact with and gain significant information about millions
of users using those platforms. The entry of ‘big data’ technology consultancies’ in the advertising
sector will result in increased competition. Consultants such as IBM, Accenture, PWC and Deloitte
have dedicated arms created to provide advertising services and their continued acquiring of creative
agencies worldwide will result in severe rivalry in the advertising sector.

4. Threats of Substitutes - Mary-Jo

The marketing industry is one of the fastest changing industries, Facebook is becoming less
relevant and the likes of Tiktok are changing the game

For example Tiktok was created and then Instagram came along with Instagram Reels as a
threat of substitute.

The threat of substitutes is very real. Customers, of course, decide on price in many cases, but
the quality and value of a product or service also influence its worth. Even if there is a lot of
competition in the market, the price is always part of the customer's correlation and conscious
choice on a company.

5. Bargaining power of buyers - Miten Kathiriya.

Customers' purchasing power is limited in this industry. Despite the fact that customers may
switch to one of the hundreds of others. Nonetheless, there is the possibility of product
diversification in this sector; each marketing and media agency can generate its own design
and thus produce a greater value for the client beyond what any other agency can achieve.
2. WRSX and industry strategic capabilities

Strengths - Stella
● WRSX is a creative, innovative, customer-driven communication company built around
highly specialised business units.
● The company invested in reprographics backward integration. By doing this, the business
reduced operating costs while increasing its competitive advantage over its competitors.
● WRSX invested hugely in research and insight department which keeps the company abreast
of the industry and thus ensures that the company stays ahead of its competitors.

& Weaknesses No tools that we can use as such

Resources -
We need to look at their financial capabilities

Part 1: External

Strengths and weakness, Opportunities and threats, Resources ( Human, financial resources),
Capabilities.

Part 2: Internal - Stella

● Increased in costs
● Loses of some talented people from the Group in the last year – particularly in the US
● The staff that resigned left the company with their some of their Premium clients
● lost clients as a result of the corruption scandal that rocked the company last year and it will
be hard to get some of those clients back even though they have sacked all of those directly
involved in the scandal and will be tightening up on corporate governance.
● Investors seeing the company as now being over-exposed to financial risk

3. Strategic purpose - Their stated strategy at the time of the merger

´´Creative quality and a range of advertising and marketing communications services to support
clients globally´´

Mission - Is to increase its market share and rank in the top 10 agency group globally by acquiring
smaller, more niche competitors and growing naturally.
Major Objective
According to Michael Porter, firms frequently use the three broad categories of strategies of cost
leadership, distinctiveness, and focus to establish and maintain a competitive edge. 2013 (Tanwar)
The WRSX focus plan is more appropriate for the company's extensive expansion of traditional
advertising markets in Europe. It's important to concentrate on particular marketing communication
segments that would be beneficial to the company.

Vision
Aim - stella - Currently existing problems restrict businesses from expanding, WRSX needs to adapt
its strategy to take into account new methods for information exchange and communication
coordination in order to meet the evolving needs of clients who seek out global and international
marketplaces and want more extensive and all-encompassing services.

• First, to support their clients and stake out their position as the industry’s most client-focused group.

• Second, to deliver against our operating plans – this will be the key to building on the company´s
recent progress and to creating sustainable shareholder value.

To continue exploiting the opportunity to buy market share in some sectors and to broaden the range
of services we offer our clients.

Invest in advanced research to increase creativity and innovation in other to continue to keep their
clients happy.

(Is it appropriate? Is it motivating? Is it enough? Does it need to be changed?

Look at page 4. The strategy at the time of the merger.

Page 6. Mission statement, ‘ How we add value’.

The WRSX share price has been underperforming in the advertising sector for the past

18 months and analysts have written of “strategic drift” and “lack of strategic focus in

low-margin subsidiaries
 4. Culture and its impact on WRSX strategy

How do they staff get employed? Promoted, fired, scandals

Key words - value, norms

Organization Culture and the impacts of the culture………

The corruption scandal.- Corporate Governance

Stella - There have been reporting irregularities in the past. The problem was the way certain offices
reported revenues and associated costs. There have been allegations of bribes to win business which
have come from the Paris office and while an internal investigation was conducted no charges were
made.

Stella - Financial Performance ratios

Investment
Ratio Performance Ratio Liquidity Ratio Gearing Ratio
ROCE ( 33/294+255/294*100 ) = Current ratio ( 255/294 *100 )
EPS = 15.23p 12.9% = 86.73% Gearing Ratio ( 80/176*100 )= 45.5%
Quick Ratio ( 255-10/294 *100
Gross Profit (190/200*100 ) = 95% ) = 83%
Net Profit (33/200*100 ) = 16.5%

Investment ratio
WRSX has to boost company sales and cut costs in order to boost Earning per share

Performance ratio
This ratio demonstrates how effective WRSX's management system has been, however
because WRSX's ROCE figure (12.9%) is less than the market average of (15%), they need
to maintain it for a little while and then increase it.
Additionally, a substantial amount goes to operating expenses, particularly personnel costs,
which WRSX must lower by reducing the number of employees in order to meet up with the
industry average.

Liquidity ratio
The company's reputation and credit rating are both impacted by the liquidity ratio.
Liquidation will result from ongoing failures to make short-term obligation repayments.
Therefore, this ratio is crucial to the credit ratings and financial stability of any business,
which is determined by the turnover of its inventory, trade receivables, and trade payables.
As seen on the balance sheet of WRSX the trade and other payables of 275 is more than the
trade receivables of 175, and in light of this the company should cut down on trade payables
in other to stay afloat.

Gearing ratio
Compare the gearing ratio of WRSX (45.5%) to the industry average (42%) shows that this
is higher and should be lowered. Therefore, as bank loans make up the largest amount of non-
current liabilities, the company is advised to reduce this.

Stella

5. Conclusions
In conclusion, WRSX Group should focus on taking advantage of the potential in expanding
new geographic markets, particularly China, India, and Asia Pacific, in order to reduce labor
costs over the next five years. Given the severe restrictions on foreign direct investment
(FDI) in a number of Asian countries, growing the market or acquiring a local advertising,
marketing, and communication firm may be a sound strategic move.

For regular market share WRSX businesses can differentiate themselves by offering a mix of
advice, online marketing and advertising, web design and development, and e-commerce/e-
business. However, as noted in the PESTLE study, the company must also adhere to some
outdated advertising strategies if WRSX wants to sustain its current customers, particularly in
WRSX Group Europe where the population is aging.

In addition, WRSX should place a higher priority on improving its innovative skills and
developing a unique unit of digital marketing and communication services in order to expand
the diversity and breadth. A product development strategy is a smart strategic decision
because it enables WRSX to keep up its market viability and competitive position. A 20%
increase in profit margin might be attained by putting a product development strategy into
action.