WRSX: The Strategy Experience

 

 

 

WRSX group is a global advertising and communication company that was established following a merger of three agencies. The company specializes in selling of its products as well as services to business clients around the globe. It has its major offices in New York, Paris, London, and Singapore. The company is now well established, but like most businesses in competitive markets, it is faced with a wide range of strategic issues that have prevented its growth and stability. At present WRSX cannot successfully capture the opportunities present in the adverting and communication industry (Sigz, 2017). Thus, WRSX is faced with trends of rising operational costs and competition. The costs have been experienced largely because of the diversified operational styles accompanied by the rising costs of retaining talents. Some of the issues present are such as corruption scandals and corporate governance issues that have affected WRSX’s reputation adversely (Sigz, 2017). Competition has also affected its market share prices and profit margins. Therefore, a strategy that could stabilize the internal functions of WRSX and consider the external threats and opportunities could effectively improve efficiency and its leverage.

Contribution of a Particular Decision to a Specific Performance Outcome

For a long period of time, the share price for WRSX group has been underperforming because of issues related to allegations of bribery and increased levels of competition. However, within the six board room meetings, the share price for the WRSX group has increased from £2.47 to £7.70, which is an indication of improved performance in the company (Sigz, 2017). The specific instance relates to an increase in share price. The overarching goal of the strategy was to increase the market share as well as the share price for WRSX group in order to bring down the costs, at the same time increasing returns for our shareholders.

Conflict of interest is a major issue faced in boardroom meetings, but it is imperative to note that all the meetings were governed by a set of well-defined rules. Throughout the entire simulation, the decisions were to maximize wealth and to increase share price. After understanding the internal factors that affected the company, the emphasis was to improve corporate governance, although expansion to emerging markets was also a secondary priority (Simerson, 2011). Nonetheless, given that 50% of the revenue for WRSX group comes from the U.S market, then the decision was to improve the corporate governance. Subsequently, WRSX’s share prices improved after the six board meetings. This was attributed directly to the deliberation and decisions of the board meetings.  In addition, improved corporate governance resulted in an increase in WRSX’s price-earnings (PE) ratios for consecutive three fiscal years.

Following the scandals and corruption allegations and other irregularities related to WRSX’s offices, reference to the manner in which revenues as well as other associated costs were reported. The implication is that there was no standardized group-wide code employed to promote corporate governance. Thus, through corporate governance, standards were set whereby different branches, divisions as well as departments communication their progress in the same manner. The Ten Point Code of Business Conduct was recommended as part of enhancing the company’s corporate governance. This was recommended during the second board members' meeting. This was necessary to “following the unproven allegations of bribery in the Paris office and the resignation of the CEO the share price has been in a long-term decline over a number of quarters” (Learning Dynamics 2009, p. 22). The corruption scandal that involved the global CEO of WRSX had to some extent damaged the reputation of the company, and this was linked to corporate governance issues. Staff costs were significantly high compared to the communication and advertising industry average by 5%, and this was a result of poor corporate governance at the organization.

The decision to improve corporate governance resulted in increased market share, cut down costs of operations, increased growth rate, and acquisition of undervalued assets. For example, corporate governance improved the reputation of WRSX and creation of new employment policies that were needed to retain talent and reduce costs of operations (WRSX, n.d).  Initially, the strategic plan for WRSX was to diversify its operations into the Asian market, and improved corporate governance may have contributed to WRSX's performance in terms of increased share prices (Johnson & Scholes, 2002). Also, ethical consideration improvement in the international market could have resulted in a stellar performance in the Asian markets. Corporate governance was restructured to ensure that managers and other leaders are held accountable for their own behavior as part of ensuring the success of WRSX.

Application of a Relevant Theoretical Framework

The theoretical framework applied to assist in the decision-making was the SWOT analytical tool. The SWOT was useful in analyzing the internal environment of WRSX Group (Johnson, Scholes, & Whittington, 2009). The SWOT analytical tool was a strategic planning method applied to evaluate the strengths, weaknesses, opportunities, and threats. The SWOT analysis helped in developing the strategy that resulted in an increase in the share price for WRSX group by bringing down the costs of operations. The table below is a SWOT analysis for WRSX with the view of identifying the strategic options available for the company.

Strengths

§  Highly specialized business units

§  Diverse with international offices

§  Customer driven

§  Creative and Innovative

§  Financial equity

Weaknesses

§  Inability to retaining good staff

§  Poor corporate governance

§  Developed mainly through merger and acquisition

§  Underperforming share prices

§  Lack of focus in low-margin subsidiaries

§  Poor leadership practices and corruption issues

Opportunities

§  Can invest in organic growth

§  Low Interest rates in Euro zone and US.

§  Chance to balance commercial considerations with corporate governance as well as business ethics

§  Invest in reducing carbon footprint

§  Develop partnerships and mergers

§  New product as well as service development

§  Enter new geographic markets

§  Acquire new companies or divest businesses to values shares.

§  Adverts on mobile phones and other platforms which are online based.

Threats

§  Strategic drift

§  Loosing good staff

§  Digital advertising platforms

§  Recessions accompanied by economic downturn

§  Increased levels of competitions

§  New technology, mobile platforms and Website platforms.

§  Bribes and corruption- business ethics

§  Competition from China and other BRICS

 

The theory supported the decision made because the external environment and internal strategic factors were considered and the options available for analysis for strategic management were established. One of these options was tighter corporate governance to promote cost control. This was achieved by centralization of the central office and setting up new standards. The SWOT analysis was helpful as it highlighted internal strategic issues that required attention. The weaknesses were linked to poor financial performance indicators as well as poor corporate governance (Sigz, 2017). In addition, the WRSX analysis provided a number of investments that could be undertaken to improve the performance of the company.

Relevance of Emergent Strategy to the Final Share Performance

Following the meetings undertaken by the board members, the initial strategy was to increase the share price of WRSX through expansion into BRICS countries, such as Latin America, India, and China. Thus, from the initial strategic position as well as strategic choices, the strategic position, and strategic choices provided at first changed a lot. Initially, it was established that investing in BRICS could create a market for consumer goods, hence increasing market share. For example, China’s population would provide a market for the services provided by WRSX (Buckley, 2002).  Basically, an acquisition to expand the business of WRSX would result in an increased rate of growth, market share, reduce costs, improve margins, and unlock value that was initially mismanaged (WRSX, n.d).  However, during the third and fourth board meetings, it was agreed that expansion was a secondary move, and it was not most important for the company’s success.  In addition, the members realized that the growth in BRICS was hinged on the ability of the company to meet the changes in customer needs and preferences.

The changing strategic position and strategic choices were informed by the market research outcomes, environmental scanning, and SWOT analysis. It was established that improving corporate governance was a more valuable strategic option compared to expansion to new markets. This is because in order to be success full in foreign markets, it is imperative to make changes in corporate governance in terms of ethical considerations, rules, and business regulations and standards (Johnson, Scholes & Whittington, 2011).  Changes in the financial position of WRSX also informed the changes in strategic choice. Thus, the decision to implement the 10 Point Code of Business Conduct simultaneously was to improve the reputation of the company following the South American scandal (Brown, 2014). It was agreed that a sub-committee be created to review the corporate governance model of all WRSX Group subsidiaries to improve the ethos and values of the organisation. Subsequently, the aim was to impact the reputation of the company's public image in the global markets.

Strategy into Practice’ presentation

One of the Strategies into Practice’ lectures I attended this year relates to the strategic management module. After studying this strategic management module have been in a position to understand the strategic position of organizations, the ability to turn strategies into action, and the strategic choices required by companies to improve their future (Johnson & Scholes, 2002).  The WRSX Group case study has been influential in terms of strategic approaches and tools used such as SWOT analysis, PESTEL, and the Five Forces among others.  For instance, I was able to use the SWOT too to analyze the internal environment of the company to establish weaknesses and strategic plans to solve the issues. SWOT stands for strengths, weaknesses, opportunities, and threats, and through the module, I have been able to understand the function of each of the four elements.  Additionally, I also learned about the strategy in terms of the different levels such as the basic levels which include both the corporate level and the business level. The group meetings were essential in improving communication skills. All in all, the module has been effective as I have practiced as well as improved my personal communication skills. Also, I have learned and improved my knowledge of strategic management.

Conclusion

            WRSX's success in terms of an increase in share price within three years can be hinged on capital planning and execution, accompanied by a clear strategy. For instance, improved corporate governance created room for investment because a good reputation and public image are associated with better performance.

 

 

 

  

 

                                                                     References

Brown, D. J. (2014) Strategic Management - Strategy Experience. [Online]

Buckley, P. (2002). International business versus international marketing. International Marketing Review, 19(1), pp.16-20.

Johnson, G, & Scholes, K, (2002) Exploring Corporate Strategy, London , UK: Prentice Hall.

Johnson, G, Scholes, K, & Whittington, R (2009) Fundamentals of Strategy, London , UK: Prentice Hall.

Johnson, G, Scholes, K, & Whittington, M (2011), Exploring Corporate Strategy, (8th edn), London: Prentice Hall.

 Learning Dynamics (2009) WRSX Global Advertising & Marketing Communications. [Online] 

Sigz, D. (2017). SIR of WRSX Group. WBSX Group.

Simerson, B. K (2011), Strategic planning: A practical guide to strategy formulation and execution. Santa Barbara, California, CA: Praeger.

WRSX (n.d). Board Meeting Five Executive Summary Agenda Item: One to five. [Online]

 

 

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