Idea Transcript
STRATEGIC MANAGEMENT WRSX Group Abstract
This report demonstrates the strategic learning from the board meeting 2 and 3.
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Executive Summary Report analyzes the WRSX Company’s 2 board meeting and the various agenda discusses in the board meeting and presents the overview of parameters that has impacted the company’s scorecard. Every board meeting has different agenda being discussed in the meeting but as always is the case few parameters always outweigh other parameters and this has impact on company’s score card, nonfinance performing indicators and share prices. During the board meeting 2, the two important parameters that has impacted the company score card are client churn out control and potential acquisition, which clearly guides management and company to focus on bringing the top line growth to company’s agenda. This had positive impact and did increase the share prices. Following this in third board meeting, the top line growth did show some phenomenal increase but the profitability took the big hit due to increase in the operational cost. The management discussed few agenda in the meeting and primary being outsourcing the central agency work and changing the organizational structure to meet the strategic goal. Both the factors brings uncertainty and doubt in the mind of shareholders hence the company witnessed dip in the share prices and company’s performance indicators. We believe company is trying to balance between short term as well as the long term goal of the company and is caught in between hence losing the focus.
Board Meeting 2 Based on the agenda discussed in the board meeting 2, the two factors that had greatest impact on the company score card are client churn and potential acquisition. We know that over all the world economy and the industry sector is going through the gloom period and in the current industry, competitors are going through acquisitions to build the market share. The two factors that we have focused on clearly put emphasis on building a long term business by holding on to current client and expanding the client base. We know cost of acquiring a new client is lot more than the cost of retaining the existing client. Bringing optimism and faith in the gloom environment brings the positivity in the share price and the prices of the stock increased by 0.18 Euro after the board meeting 2. If we analyze the strategy of the company from BCS point of view then we can infer that it tries to retain its existing clientele portfolio which is the cash cows for the company. Since the existing client in the saturated market do not attract higher margin they are classified under cash cows. Company trying to capture the larger market share by acquisitions and bringing the new service portfolios for the existing client can be classified under stars where with the change and innovations in technology, WRSX can focus on building a high growth, high margin business for the existing as well as the new clientele. It can be seen as an effort to change the negativity to the positive sentiments which is clearly seen in the increased revenue and profitability of 2.5 million GBP and 1.2 million GBP respectively.
BCG Matrix.
Although the company has focused on other parameters such as corporate governance and knowledge sharing and communication coordination, they are long term measures and do not bring immediate revenue growth and sales. Hence the important point to focus in current gloomy times is the ray of hope and optimism. The two agenda elements chosen are client churn and potential acquisition. They are complement of each other in such a way that one factor focuses on retaining the existing clients. If the company is not able to hold on to the existing clients, other parameter complements it by capturing the market share with new acquisitions. It is a well thought and researched steps, and it is extremely important for the board to be responsible and take the challenges head on rather than being conservative and sitting on the cash. Above mentioned factors can be seen in the non-financial performance indicators, management of growth is increased by 1.5 which in turn reduces the management of risk by 2.3. The same is seen in the increase in the leadership capability by 2.4 to 41.6. The leadership capability parameters are the indicator of shareholder’s faith in the current capability and the future vision. The increase clearly indicates that shareholder and board believes in the current leadership and supports to the max. The non-financial performance indicator witnesses the increase of 2.1 due to this. With focus on client churn and potential acquisition, it will help company to achieve its strategic goals, by expanding the business and increasing its market share. Focus on growth is of paramount importance for the WRSX who wants to differentiate itself in the communication and advertising agency and bring in breadth of advertising; effective advertising that increases market share and mutually beneficial client/agency relationship.
Board Meeting 3 Based on the agenda discussed in the board meeting 3, the two factors that had greatest impact on the company score card are outsourcing central services and changing organizational structure to meet company’s strategic challenges. Both these factors are creating the environment of uncertainty puts the doubt in the current vision and capability of the company as company is thinking of outsourcing its central services. This puts a doubt in the mind of company’s shareholder that company is not able to drive the cost down itself and hence it is unclear about what to do reduce the cost, so outsourcing is the only option. This also risks the quality and control in the other party that can hamper the final delivery to the customer hence the risk increases as well.
With earlier board meeting where the focus was crystal and clear to increase the revenue and growth with reducing the client churn and redesigning the service portfolio, this is clearly seen in the company’s performance scorecard. Revenue of the company has increased from 218.3 million GBP to 250.5 million GBP. The effects of clear direction to sales and business development team were bringing in the clear result in the performance score card. The problem started when the profitability of the company plunged in spite of the increase in the sales figure. Company was not able to keep the operating cost down which increased from 169.7 million GBP to 200.7 million GBP. The clear increase of 40.7 million GBP for the increased sales of around 33 million GBP is not justifiable to any individual as well as the shareholders. The parameters outsourcing central services and changing organizational structure are chosen over the other parameters such as market opportunities in Asian SMEs, competitive advantage through backward integration. The reason being the chosen factors are clearly negative and which is visible in the company’s performance score card. If we would have chosen the market opportunity in the Asian SME, it should have brought the positivity to the company’s share price which is not the case. The stock prices plummeted from 2.7 to 2.6 GBP. Because the negative sentiments in the company’s board meeting overweighed the positive points discussed. Also, the world is going through the flat growth and market does not look any positive in spite of company trying to focus on growth and performance. Company’s reducing profitability and increasing operating cost are cause of concern and focusing on these parameters will help clearly help to company achieve its strategic goal of achieving higher profitability. WRSX has always focused on providing the one stop solution to its client with various service portfolios under one roof. But it posed the question on various issues such as differences between horizontal specialist differentiation of advertising such FMCG specialist advertising and business to business advertising. The same differences are visible in the company’s non-performance indicators of the company, such as leadership capability is reduced from 41.6 to 39.0. It is also visible in the management of growth; the indicator is down from 49.0 to 48.5. This reduction is due to the chosen two parameters that have spread the negative sentiments. To change the negative sentiments and increase the share price, company will have to deliver before the board meeting, in terms of driving down the cost, decreasing the operating cost, and also increasing the profitability.
Conclusion Business simulation exercise helped us in several ways to understand different phases a business goes through, various economic and industrial factors that affect the growth of the company. We understood the multi-dimensional thought perspectives that go through the each board meeting and decision making process for the company to formulate strategy and the performance indicator parameter that help company evaluate whether it is on the right track to achieve its strategic goals. During the course of exercise we have developed the skills such formulating various business strategy, applying tool to develop such strategies and evaluating it with different indicators. Every long term goal is achieved by series of short term goals and hence it should be continuously monitored and redesigned to incorporate latest macro as well as micro economic environment. On the scale of 1 to 10 we would like to rate this assignment as 7 to facilitate our learning because we believe it helped us stimulate lot of creative discussion, strategies and tools but at the same time there is a scope to incorporate choice of your own industry and enter into specificity. But overall we thoroughly enjoyed and learned the whole process of strategy making.
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