An analysis of the Micro- and Macro-Environment
The micro- and macro-environment covers almost every possible aspect a company can be affected with. A detailed overview about the components can be found in the appendix (Figure 1.). Ideally a complete analysis of a business and its environment does not just consist of two or three models but in this word restricted case the focus is set on Porters 5 forces for a micro-analysis and the PESTEL framework to analyse the macro1
The name was given by the first letters of the family names of the four cofounders Waldron, Roux, Silberstein and Xao environment. Additionally, there will be a short digression on competitor analysis added.
1.1 Macro- Environmental Analysis
There are several frameworks and theories to analyse the environment of a business. For this assignment, the choice went to the PESTEL-Analysis to receive an overview about the macro-environment (Gillespie (2012)) of WSRX;
nevertheless, according to Y¼ksel (2012), this method provides just a general overview about the current situation and further analysis could be done in case of uncertainties. The major points of the analysis can be found in Figure 2. They show several aspects which might be considered; still there are some more but only the most important have been considered, due to the word restrictions. Political
Privacy laws relating to
Regulation of access to
condition to networks
Increasing speed of
data speeds (cable and
Developments of new
transferring and data
developed for mobile
and fixed devices
Costs of hardware
Rate of economic
growth and changes in
spending on PR
Development of energy
Enhanced use of so
called green energy
Continuing of use of
Rate of adoption of
new services and
growth of ecommerce and
employment laws or
Competition laws in
the specific countries
Figure 2: PESTEL Analysis
According to a report of WRSX (2010), new employment laws were introduced in order to guarantee the protection of the employees. In addition to that, new regulations concerning the protection of the business customers were introduced to ensure the correct usage of personal data. Now, there exist a strong regulatory policy on the use ad disposal of personal data (WRSX (2010)). However, the new laws also include several investments in new systems and further education to work with these systems.
The economic factors indicate that there might be a fluctuation in the interest rates. In contrast to the US and Europe, the UK has higher interests rates; nevertheless, the predictions are indicating that there might be a drop in the UK. However, this is unknown and might also influence the company. With regards to the socio-cultural factors, the company has to consider the adoption rate of new services as well as the continuing usage of the Internet of the business customers target group. If the company disregard this facts, the company might fail in attracting business customers.
Furthermore, the WRSX Group has to face technological facts. The increasing speed of data speeds (cable and wireless) and the developments of new transferring and data technologies force the company to invest into new technology. This new technology might also entail factors concerning the consumption of energy. Therefore, development of energy saving devices is common in which the company should also invest or at least consider in order to decrease the possible energy consumption as well as the electro smog.
1.2 Micro- Environmental Analysis
To receive an overview about the situation of WRSX within the business sector, Porters five forces (see Figure 3) will be used, which is a model that indicates the driving forces which define the competitive intensity and profitability.
Figure 3: Porters five Forces (Karagiannopoulos et al. (2005)) Threat of New Entrants
Almost every day new entrants join the marketing, media and information technology sector and try to build new businesses based on the technology given. Nevertheless there is the cost advantage of WSRX, because the longer a company has been a part of the industry, the higher is ideally the cost advantage over new entrants. Also, the risk of new investment is lower than that of a new entrant. Government Policies are binding for any company. A company must mould itself regardless of how big a player it is to conform to the government policies. In case an advertising agency wants to enter a new market, it must conform to the actual government policies.
Bargaining Power of Suppliers
The less the number of competing bigger agencies, the lesser the power of the suppliers is. On the other side, there is the threat of forward integration of suppliers, e. g. from big media companies, which decide to do the marketing part for their customers on their own.
Threat of Substitute Products and Services
Of course do customers decide on price in many cases; however, the quality and the value of a product or service influence the worth as well. Still, if there is a lot of competition in the market, the price is always part of the comparison and decision of the customer on a company.
More relevant in case of WRSX seem to be the other more specialised companies, such as IT-Agencies or new technology agencies with their specialised products and services. Customers might then decide to engage those more than WSRX. Bargaining Power of Buyers
The power of customers is limited in this sector. Even though that customers might change the agency to one of those many others. Nevertheless, there is the chance of product differentiation in this sector each marketing and media agency can develop its own style and therefore create a higher value of the company which cannot be achieved by another agency.
There are lot of competitors on the market and nowadays most competitors can be easily found and compared in the Internet. Google search (2013) provides 843 billion results for the terms advertising agency new york (see Figure 4 in the appendix). And as in the WSRX papers (2010) already stated, the channels of advertising become more and more versatile with new specialised competitors.
1.3 Competitor and Internal Analysis
To round up the analysis section a short SWOT-Analysis is provided. It can be seen that there are some challenging threats and also a few weaknesses, but the whole situation of WSRX seems full of opportunities for the future. Due to its strengths and opportunities, maybe achieved because of its durability and long life at the market it has a strong basis, which can be enhanced and readjusted to stay competitive and to regain old power and influence. According to Karagiannopoulos (2005), it can be said that the most of the considered disadvantages can be eliminated by innovation. For further details the following graphic might be useful (see Figure 5).
Human Resource problem
High technology level
Poor social responsibility
Limited sector specialisation
Lack of co-ordinated leadership
Innovative and Creative
High threats of competitors
High threats of new entrants
Creating diversified demand
in custom sectors
Companys reputation due to
Acquiring new technologies
Joint ventures with local corruption companies
Figure 5: SWOT Analysis
Bad Carbon Footprint
Lack of legal advice
A full competitor analysis seems also to be important but before a complete market research has to be done and would go beyond the scope of this assignment.
Impact and Strategy Change
It is more than obvious that the WSRX Company has now to expand its strengths and should consider smaller but therefore more effective changes than restructuring the whole business. According to Porter (1998), there are three generic strategies: cost leadership, differentiation and cost / differentiation focus.
Figure 6: Porters Generic Strategies (Bordbiavantages (2010)) It is very difficult to reach a cost leadership, especially in such a challenging environment; however, WRSX already has the advantage to charge higher prices due to its added value by creativity and a strong brand image. The more effective way to gain competitive advantage seems to be a mixture of differentiation and differentiation focus as the current strategy of WRSX is. Creating and developing unique campaigns and services with a special design for a segmented target group means to use already existing structures and enhancing them.
1.4 Impact of the Environment on the current Strategy
After this complete analysis and statement about the strategy, a positioning and the impact of the environment has to be analyzed. Johnson (2011) regards strategic positioning as the impact on strategy of the external environment, the organisations strategic capabilities, goals and culture. The strategy itself can be influenced by many factors. This already starts for example with protection laws for the customers, which might have a huge impact on the company, because it can affect the whole business in case of correct usage of personal data.
Due to the bargaining power of shareholders and customers they might influence the strategy of the company. If WRSX fails to convince its shareholders of its profitability, they might lose their funding base and might therefore become unable for further grow. A stabilization of the current situation would help to gain sustainability and strengthen the trust again. Furthermore, not every possible customer is aware of WSRX, also dependent on its online availability. In conclusion WRSX has to find new ways to acquire new customers, e. g. by direct marketing. Otherwise, customers might decide for different and more specialized companies.
Very important is also the fact of a fast changing technology sector along going with a change in demography. Many consumers of the customers target market are equipped with higher technology, such as Internet access, smartphones, tablets and so ones, which leads to a lot of new and important channels of advertisements. WRSX has to react on this and might consider a more frequent way of change. In the end, it has a huge impact on the companys success, especially in terms of differentiation.
There might be other influences as well but the most important at this time have been mentioned but a further and deeper analysis should be done for each headquarter, depending on their environment. However, it is obvious that there have to be new capabilities and changes.
1.5 Strategy Direction
It is always very difficult to decide for the strategic direction of a business: it is a question of the business core competencies and resources, whereby normally the scope of leverage of a business is highest for a market penetration strategy and lowest for the diversification strategy (Friend (2009)). However, a decision has to be made and in case of WSRX it should lead to a mixture of product and market development. On the one hand, there are the regular and long-term customers to which new products and or enhanced service can be sold and delivered and on the other hand, there is the already well-known brand image which might be brought to new circles of customers and other branches. At some stage it might be obligate to readjust the direction or to adopt parts of other strategies, in order to stay competitive and gain an advantage.
Special strategic choices which dispose of the options for strategy on terms of directions and methods (Johnson et al (2011)) can now be presented. Juliette Waldron herself stated (WRSX Welcome v5 (2010)), that the industry is also going through a great change of changes concerning media options and digital channels and lots of opportunities are given for the WRSX group. Even though shareholders see a financial risk in owing extensions of service range and buying market shares, and the loss of customers resulted by a corruption scandal (WRSX Welcome v5 (2010)), there is still the strong reputation of WRSX, regarding their innovation and creativity. In order to achieve the competitive advantage finally, the company needs to create capabilities, which are dynamic, valuable and difficult to imitate, meaning the use of their resources in competencies and strengths.
Their already stated creativity and brand image should be used to attract new customers and create for them an almost inimitable services; although, the possibilities of channels and software are limited and the danger of imitation of an almost endless number of competitors. At the end, the success of WRSX results by its competency to create a perceived value for their customers, even though the output might be similar to those of others. This then would create a competitive advantage.
It might also be a good option to start with a market penetration strategy, as Porter (1998) describes, in order to retain old profits and focusing on either differentiation or on a widened target market. It is furthermore essential to raise the loyalty of their customers and should focus on companies, which provides products for the younger and hipper audience, because they might create very strong and innovative campaigns, accepted by the youth and therefore creating a higher value for their customers. This would go along with an increase of the quality of their products and therefor reduce the misgivings of their shareholders. The maybe not meaningful acquisitions during the last time (WRSX Business Development v3 (2010)) could now be evaluated as very useful and should be stronger integrated into the companies process, to harm all involved people and to regain the image.
All in all, it is an adoption of a strategy of change which needs to be implemented and developed over time. It is always important not to break up with further enhancements.
WRSX and its Organisational Structure
One of the major problems of the WRSX group might be the poor support of their strategy by their own organizational structure. A poor implementation of it, might also lead to failure in business itself, as seen in the loss of staff (WRSX (2010)). Mainly, it can be said that the WSRX Company is built in a multidivisional structure, based on its products and services and their geographical range (see Figure 7).
Organizations differ in the quality of organizational behavior that they develop. These differences are substantially caused by different models of organizational behavior (Sarab (2011)). From interest now is the impact of the organizational structure on the company. Therefore a tool, developed by Davis, might be consulted for help. It consists of four different frameworks: autocratic, custodial, supportive and collegial (UniversalTeacher (2013)). These models show evolution of the thinking and behaviour on the part of management and managers alike (UniversalTeacher (2013)). These frameworks show the influence of different factors within an organization, of course depending on several circumstances. Most companies just use one out of those for, in case of WRSX this seems to be the autocratic model, because every strategy, which was defined by the management impacts the organizational behavior and therefore the organizational structure.
Figure 7: Organizational Structure (WRSX (2010))
With this framework, because the autocratic model is based on power with a managerial orientation on authority, the performance result is minimum because the employees are oriented towards obedience and dependence on the boss. Those employees need to have subsistence (UniversalTeacher (2013)). This is the fact, why a change should be implemented it would also slightly change the behavior and therefore also the output, due to a slight mixture of the frameworks. It is obvious that the WRSX Group has not just to change, but also to extent its organizational structure, to meet all possible strategies, such as market penetration, development and focus. Concretely, this means to add a Support and Quality Assurance Department and maybe also a Market Research Department.
This would very strong improve the quality of their services and open new opportunities for further product development. Another idea would be to break down the multi-divisional structure to a subsidiary based company, with headquarters in each country, due to the fact that almost every country already has almost the same structure, alongside with some local differences due to different technology usage and behavior. In any case, this restructure should go along with an improved human resource management to strengthen employee loyalty and therefore customers trust. It is very important to keep the structure clear for the employees itself but also for the management board. Every organizational structure should fit to the corporate culture in order not to overstrain the employees motivation.
However, the wide range of the offered services should be held and therefore existing departments not be cut down. A consideration of specialization on specific services in specific countries could also help. Finally it can be said, that the structure needs to be enhanced but should be constituted in a corporate culture and a transparent management. As seen, there are a lot of possible improvements.
Finally it can be seen that the WSRX Company has a lot of strengths and opportunities to come back to its well-known brand image and to grow further. The biggest changes should be made within the company itself, especially in its organisational structure. If it can overcome its troubles and implement a new corporate culture, it can become again reliable and trustworthy for its customers and might then create again high end campaigns and unique brand images maybe even such big ones as Made in Germany.
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Figure 1: Micro- and Macro- Environment (Dillon (2012))
Figure 4: google-search screenshot (google (2013))