S&S_Company

CASE STUDY: Saatchi & Saatchi Worldwide: Globalization and Diversification QUESTIONS & ANSWERS, 1. (a) Why did Saatchi & Saatchi decline' (b) What would you have done differently at Saatchi & Saatchi to avoid the downturn at end of the 80s' a) Saatchi & Saatchi (S&S) Worldwide Company, which mainly services range from market strategy, communication and forecasting, was founded in 1970 and soon built up for its neoteric ideas and business patterns. During the very early years of the company’s operation, the company managed its items and developed as well as other rising companies. According to the Firm Lifecycle Theory, enterprises may have to experience 10 phases including Courtship, Infancy, Go-Go, Adolescence, Prime, Maturity, Aristocracy, Early Bureaucracy, Bureaucracy and Death (Adize 1979). Judging by the performances that the Saatchi & Saatchi Company displayed, the company was getting though the first 3 stages. However, like every young child, the company needs some frustrations to be maturity. As seen from the case, the development degree of S&S Company drastically shrank after 1986. There must be some reasons which led to this result existed behind the recessionary phenomenon. Specifically in this case, the main reasons might belong to 4 categories which are Financing, Client, Acquisitions, and People & Cultures. It has brought plenty of benefits such as expansion of operating scale, shares of the market and the influences in the area by purchasing Bates in 1986. Nevertheless it turned to be the direct affair that triggered the decline of the S&S Company’s profit. From the perspective of Client, because of the purchase, a series of client account has been lost. Moreover, the confidences the clients hold were facing with testing caused by the development of new market. Especially in the United States (US), some clients terminated cooperation with S&S because of the huge reputation of S&S. The reason for the termination might be that they did not expect to have similar ideas in their own advertisement as their rivals. From the view of Financing, the affair that Bates known as the main competitor of S&S has been purchased might result in crisis of financial trust. The financial trust crisis refers to S&S company not only afforded its own huge accounting costs, but undertook its competitor’s account. Following that, consumer product companies, such as Procter & Gamble and Colgate-Palmolive recalled nearly hundreds of millions of dollars worth of business. From the perspective of People & Cultures, the alteration of employee loyalty is a major factor to the decline of S&S Company. As seen from the case reading, staff departures after the purchase also troubled S&S Company. Additionally, the departure of S&S’s top financial executive, Marten Sorrell, hit the sustainable development of S&S. Even worse, Marten also acted a significant position in attracting investors. A possible awareness that Saatchi brothers would not interested in S&S as before anymore might be realized by the shareholders since Marten left. Therefore this might be one of the reasons that impact the decline of S&S Company. Furthermore, there might be some faults that Saatchi brothers committed arose in carrying out the strategies. In 1987, the brothers undauntedly attempted to bid for two British banks. After that, the shareholders started to oppugn the focus of Saatchi brothers’ strategies. Panics were caused among shareholders by seemingly superfluous biding move. This also resulted in damaging the corporate image. Therefore, Saatchi’s share price showed a serious decrease. From the perspective of acquisitions, companies might had went beyond their earn-out period were still merged by S&S. This might reflect a weak ability of acquisition. Meanwhile, it hit the confidence hold by shareholders. Therefore, it was another reason leading decline of S&S. b) The mainly reasons for the downturn at the end of 1980s has been motioned in the preceding test. In summary, the miss that S&S committed basically located in the decision making procedure. The measures that I would adopt, based on some modern marketing theories, may differ from those S&S made. The suggestions I would have done focus on the following aspects, which could constitute a relatively entire operating procedure. Before operating activities being done, the environment that the company lies should be concerned firstly. In my opinion, some approaches could be utilized for the sake of analysing the environment. Firstly, the company could use the method called P.E.S.T to analyse the external environment. After the external environment analysis, the internal environment analysis should be followed by using the supply chain analysis. All the above work is prepared for the S.W.O.T metrics, with which the company could basically make strategies considering its own strengths, weaknesses, opportunities and threats. Using these series of methods would help the company to avoid extending market shares and operating scale sightless. Thereby, the decline might be refrained fundamentally. Actually S&S’s operating areas contains numerous industries, but the decline was resulted from that. Moreover, market analysis based on competition should also be concentrated on to avoid the decline. To complete that the company could use the method called Michael Porter's Five Forces Model. The central theme of this theory is to help the company find out what its own core competitiveness is and focus on the main area they are going to enter in (Porter. M, 1980). Moreover, a working focus could ease the difficulties of making strategies compared with multiple working areas. It is highly related to the circumstance of S&S while Saatchi brothers blindly enlarge their business scales. In this case, the advertising area should be their focus; therefore, S&S should have focus on advertising and dig deeply inside this industry. Overall, if the company could have analyse the situation and found their focus, the better strategies would be made. Even better, the decline might be avoided basically. Additionally, the company should notice the reasonable utilization of their human resources. A good leader could help the company to make appropriate strategies, following which the company might work as well as expected. Therefore, S&S should have concentrated on keeping their brilliant managers. In order to do that, some preferential measures, including higher salaries and some other inspiration methods, for the managers should have been done. Moreover, companies are consisted with managers and staffs. Not only the managers but the needs of common staffs should be cared about. According to the Maslow’s need theory (1947), the needs of staffs could be mainly divided into two aspects, which are physiological and psychological needs. Furthermore, employee incentive could be determined by the satisfactory of the needs. Therefore, to satisfy staffs’ requirement is to help motivating their working enthusiasm. However, during the period of expansion, some staffs especially one of the managers’ departure deeply hurt the company’s development. In summary, if Saatchi brothers could have concentrated the roles of staffs and adopted some motivation approaches, staffs would stay and attempt to fight with the company. Thirdly, clear enterprise culture and favourable corporate image should have created instead of the turbid direction of the company’s development to help the company avoiding the decline. Speaking of the culture of an enterprise, no matter what its scale, it could display the cohesive force S&S Company has. If there has been a clear enterprise culture existed in the company, the crisis of confidence both inside and outside the company would be extinguished as much as possible. In addition, the corporate image refers to the reputation of the S&S Company and the competitive power of the brand of S&S. Moreover, the image even influences the confidence shareholders hold when facing a crash. However, if the shareholders have been confident, the decline the company had will be avoided to a certain extent. The profitability of a company not only depends on its own operating abilities but the clients. What the clients need should by no means be ignored on account of their influences. A company could not live without clients no matter what kind the company is. Especially in this case, the client companies lost their trust on the originalities S&S holds. Therefore, my suggestion would be that S&S might have to carry out a reform of originalities innovation. In addition, even if S&S has taken the lead in the advertising area, it should still have to concentrate on the innovation for the sake of keeping regulars and attracting fresh clients. It is only by making clients happiness that S&S could stop the problem---customer lose. Alternatively, some other measures might have done in order to avoid the decline. For example, S&S might have pursued a series of institutional reforms to cater the requirements of globalization. They might have also carefully supervised the overseas companies’ accounts. Thinking of the implication of the strategies, a well-organized structure could contribute a lot. 2 Discuss how Saatchi & Saatchi has approached the balance between globalization and localization, and what would be done to improve it' After reading the case, some basic understanding could be acquired to answer how S&S balance the globalization and localization. Firstly, this question might be the hardest one for the S&S because its identity is advertisement making. They have to focus on the effects the globalization and localization bring not only to themselves but also to the client companies. Speaking of the approaches S&S adopted to balance them, they divide their advertising industry into two separate lines including regional and worldwide by making an organizational model. As can be seen from the case, On one hand the company is organized geographically, with agencies in each country of operation and coordination between neighboring countries achieved by means of regional management boards. On the other hand Saatchi is also organized by client, whereby worldwide account directors (WADs) and regional account directors (RADs) are responsible for representing multinational client needs across all agencies. WADs and RADs are currently running the 12 biggest international accounts. Frankly, the efforts S&S had done were a preferable way to balance the globalization and localization. However, the way they did merely concentrated on the structure model, which I doubt the effect for doing like that. In my opinion, there must be some more measures which could have been done to equilibrate both power of globalization and localization. As mentioned above, S&S should have concentrated not only themselves but also the client companies. However, before taking any action, basic understanding about globalization and localization should be stressed to pay attention to. While the world economy is changing every day, the comprehensions of globalization and localization should be improved. More contents have been added in the understandings. They are mainly about cultural background, customs the group perception and the level of requirement. Therefore, they should have made an evaluation for the local environment including local culture, laws and other contents relevant to the local market. It should always be carried out by analysing before business moves. Thereby, evaluating the circumstances of firstly could offer the necessary information for S&S to enlarge themselves in the home countries. Generally, different country has different identity. As a result, multinational corporations might have to change themselves to suit the requirements that host countries asked. Especially, for the sake of equilibrium, S&S should have estimated a new corporate culture contained the local elements based on the sole one the head office was holding. Additionally, speaking of the human resources, employing the local people as their staffs would be better for the company localization. Because local people know local culture and customs better rather than foreign ones do. Moreover, hire local people could make the S&S accepted easier by the home countries. No countries would set barriers for the company because of its positive contributions. In addition, S&S should get on with the local governments and people by caring about local staffs and local economy. After that, the welcome for S&S must be warmer. On the other side, the reputation and the popularity of the name or brand of S&S should be broadcasted wider though the world and the home countries by concentrating on stuffs with certain preoccupations. Especially in this case, S&S should cooperate with some known local companies and share some experiences of management to acquire supports from its business partner.. Furthermore, localization for S&S does not mean to abandon its own identity. Particularly in this case, S&S Company is famous for its unique creative ideas and diversifying operation. Therefore, how to maintain its original advantages through the battle between globalization and localization would be the mainstream issue. However, it is not enough to merely protect its old techniques and ideas. The best way to balance the globalization and localization would be that S&S carries out a reform of the ideas, firm structures and even the technologies. Meanwhile, the innovation also should be built upon the level of host countries to avoid a blindly idle renovation. Broadly speaking, in my opinion, the balance between globalization and localization refers to global localization and local globalization. Meaning, S&S might need to focus not only globalization based on localization but also localization based on globalization. 3 Critically evaluate Robert Louis-Dreyfus’ strategy to turnaround the company. According to the Firm Lifecycle Theory, the next phase after the Prime phase would be the Maturity time. To get though the hard time for the company, Saatchi brother handed the position over to Robert Louis-Dreyfus, who might be the proper executive to instead the ex-executive. He has made beneficial changes for the company; and as a result, the company displayed a strong recovery. Firstly, the efforts he has done should be mentioned again. While the company continually expanded its market shares, after looking back the strategies the company had made, he decided to enlarge S&S Company’s occupancy in the advertising area mainly by its potential growth compared with their former measures of merging others. Undoubtedly, Louis-Dreyfus discovered the most significant problem the company has by his working experience and instinct as an executive. As seen from the case, the company did commit mistake when setting the strategies. In addition, seen from the consolidated profit and loss account of S&S Company, Louis-Dreyfus discovered there might be more liabilities created by its usual blindly purchasing business strategies. To get rid of the hard situation, he started to sell some of them without any hesitation even the price was much lower than expected. As a result, he has gained an opportunity for the company to hold steady temporally. Additionally, Louis-Dreyfus did not merely carry strategies as Saatchi brothers asked, but also advise board with his thoughts. The other significance job he has done was helping Saatchi brothers to make strategies like focusing on communications services (advertising, direct marketing, public relations, and market research). This decision would consider the operating scale of S&S as a series of work. However, Louis-Dreyfus was more caution and added, “Creativity is not the same everywhere.” It could be an excellent example to understand the art of managing Louis-Dreyfus did. What Louis-Dreyfus did is so amazing that I have to admire him. As a manager, more accrual a leader, he might have got nearly all the abilities a leader should have. Firstly, he had examined the traditional strategies and considered the financial circumstance the company located in. Moreover, he made decisions decidedly but not blindly. Secondly, he knew his position in this company was a leader of managing members. Consequently, he presented his talent to be a leader who needs to show the personalities and working efficiency and earned trust from the board. Imagine if the manager was not able to hold his might be right decision, what would happen to the company. Louis-Dreyfus made a direct decision without being influenced by Saatchi brothers. Thus it can be seen that manager’s own judgment has played an obbligato part for making decisions effectively. Undoubtedly, team work is very important element if the companies want to be operated well. However, a leader who can lead the team to a proper direction is also a critical one, even much significant in some circumstances. In this case, as the company was in a tough period of development, the S&S needed a strong leader who was able to gain confidences and trust from shareholders. Thus Louis-Dreyfus, who was the befitting one, has acquired enough room and rights to practice his strategies. This might be a caution that company should delegate some power to decision executor whom they trusted in; once they trusted them, sufficient space would be given to them to operate. Certainly the mission of board and the owners would be supervision. 4 Provide advices to Maurice Saatchi on his musings at the close of the case: would rededicating the company to the principles of creativity that had built it in the first place be enough to get it out of red' The tough result for the situation of S&S was a complicated one with numerous reasons. Moreover, the red not only referred to the financial problems but also indicated some other issues which were mainly troubling the company. The issues might lie in principles of creativity, proper decision making, strategies’ evaluation, strategies’ implementation and the utilization of human resources. Generally speaking, I would not agree with the view that rededicating the company to the principles of creativity that built it in the first place is enough to get it out of the red. Firstly, the main aim for the company is to create profit. Therefore, the competitiveness of the products is actually one of important elements. In this case, for S&S, rededicating the creativity did have a positive influence on the operating situation. Because only if S&S continued contributing to the principles of creativity could maintain its status in the area. However, it is not enough since the influences of globalization. Nowadays, the competition tends to be more diversification and more elements should be considered with. Speaking of the ability of making decision effectively, it should be the prerequisite to being successful. Since the expanding scale of the operating area of the company, proper strategies have taken more and more important position. Only when suited strategies were making firstly, the production would be by no means blind. Therefore, one of my suggestions would be that the company should consider the decision layer. In addition, the globalization has gathered the whole markets in the world and the information has been shared drastically. Thus the company who can know the clients better will win the competition. Consequently, S&S may have to reevaluate its clients, target markets and rivals if they want to win the battles. As seen from that, merely concentrating on its own creativities of products is not enough to get out of the red. Products after all are stuffs, thus if the company wanted to get rid of the red, they might have to connect it with human. Moreover, the other advice I would suggest the company would be that S&S should keep looking for establishing appropriate managing groups consisted of people with managing talents. A beneficial managing team would ensure the company walking on the right way. They know what to do, when to do and how to do a business. Even if their requirements would be a lot, but the profit, the efforts they are going to do would be even more. For example, in 1990 the company started to build a new group of managing people. As seen from the consolidated profit and loss account, although the profit number was still negative, the loss of exceptional items and liabilities were lower. By knowing the acquisition problems of the company, this was a huge turnaround point. Overall, in my opinion, concentrating on the reform of managing method should be in the first place to get the company out of the red. Bibliography Schaeffer, R. K., 1997. Understanding Globalization: the social consequences of Political, Economic, and Environmental Change, Maryland: Rowman & Littlefield Publishers, Inc. Palmer, A. & Harteley, B., 2002.The Business Evironment. New York: McGraw-Hill Education, Phillips, G & Maksimovic, V., 2008. The Industry Life Cycle, Acquisitions and Investment: Does Firm Organization Matter' . The Journal of Finance. Vol. LXⅢ Adizes, I., 1979. Organizational Passages----Diagnosing and Treating Lifecycle Problems of Organizations. American Management Associations. Maslow, A, H., 1943. 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