Is Now a Good Time to Acquire UK Marketing Media Agency - Essay Example

Topic: Given the present competitive environment is now a good time to acquire a UK Marketing Media Agency?Based on your analysis of the company’s accounts should You Marketing International acquire Harrington’s?Case Study. Introduction United Kingdom fashion industry is one of the sectors in UK which have registered good performance in the current period. This industry for many years have grown tremendously becoming one of the notable industry in UK. The industry has resulted into significant impact on the social and economic impact in the country. Fashion industry in UK has become integrated to its citizens live hood. This has become turned fashion to be a possible trivial and enjoyable thus becoming more attractive to the potential and the prospective customers (Dransfield 2005). The overview on the external environmental analysis of this industry enables investors to gather several logistics before investing in this industry. PESTEL analysis entails critical analysis on the political, economic, social, technological, environmental and legal factors which have significant effects to the establishment and the success of every industry. PESTEL analysis of the UK fashion industry This analysis is essential in the assessment of any market if it is worth to invest in it. This comprises the examination of the external macro-environment which is important aspect of a company before preparing a business plan. The external environment examination is important in the decision making process. It is also appropriate to carry out this analysis over sometime to ensure that all the uncertainties and the dynamic nature of the industry are addressed in the context of fashion industry market in United Kingdom (Dransfield 2005). Fashion industry in UK is considered one of the competitive markets the world. Big fashion companies such as Burberry, Marks & Spencer, TopShop, French Conection and Super group. The PESTEL analysis is considered one of the best tools in the assessment of the market; the facts from the analysis are used in establishing marketing strategies. Political Environment This basically relates to the changes, market dynamism and influences attributed to the government. It is notable that there are a significant number of policies and regulations in UK that have affected the marketing consultancies and the media in regard to fashion industry (Britton 2009). Public spending regulation has altered the way UK relates with other countries in the context of marketing relations and the media. Notable to these changes is the opening and closing the major markets. Further European Union regulations have fostered the accessibility of the fashion industry in UK. Marketing consultancies and the media are essential in offering consultancies concerning marketing decisions in the UK fashion industry (Dransfield 2005). Closely tied with this is the legal change. Notably in the UK fashion market there is emphasize on consumer protection, health and safety laws as well as the environmental regulations and the laws regarding employment (Press 2011). Economic environment The UK economy has gone through a series of fluctuations characterized with the booms and slumps. UK fashion industry contributes to over 21 billion pounds to the UK economy offering employment to a significant number of the population. The UK economy is currently having low inflation rate whereby since 2008 it has significantly fallen by 1.3%. It is also apparent that the level of employment in UK is low as provided by the UK labour market statistics falling down to 4.8% (Press 2011). The disposable income has also increased tremendously because of the increase in GDP growth, thus the public has more money to spend on the fashion taste and preferences. The UK economy has a favorable balance of payments with reduced deficit with continued growth of sales (Dransfield 2005). It is also notable that the UK currency has stabilized as far as other currencies are concerned thus stabilizing most businesses and attracting more investors (Dyson 2010). It is anticipated and projected that UK shall continue to have lower inflation, reasonable economic growth increasing demand for the fashion products (Britton 2009). This situation is likely to influence the fashion industry in UK. Social environment In UK most of the population has access to internet and other media means, thus most of the households are recorded online. Music listening is a common characteristic among the residents in UK. People spend most of their free time notably weekends listening to music, watching TVs and videos. For socialization most people family entertainment takes place indoors rather than outings (Grandfield 2005). Fashion and lifestyles in UK have changed affecting the UK fashion market. Marketing consultancies and the media has become the immediate beneficiaries from this trend considering that most of the market segments dispose their income in the fashion industry where most of their clients operate their business activities. Technological environment There is increased rapid development in technology attributed by the advent of the new technologies affecting all the industries. This has greatly changed the way businesses operate where things are easily done by just a click. Marketing consultancies and the media have become instrumental in consolidating competitive advantage in the fashion industry (Press 2011). Innovative services are provided where competitors seek the best consultancies for informed decisions and considerations. This includes marketing strategies, customer relations management and the information systems. Conclusion It is important to note that marketing consultancies and the media in the context fashion industry have a greater opportunity, in the provision of goods and services. This translates into the need for more consultancies and sound marketing techniques and strategies. Therefore it is a perfect consideration to acquire a UK marketing media agency. TASK 2: ACQUISITION OF HARRINGTON’S Most of the companies in the current corporate world consider growing their businesses by acquiring another company as a way of expansion. This is attributed to most new companies which are in their boom opting for mergers or acquisition. It is important for the buying company to take into consideration several factors before acquiring. Financial accounts are one of the key factors that need to be considered (Fridson 2011). It is notable that the financial accounts of most companies can be used to predict the future performance of a company to be sold (Cox 2004). The various aspects of the financial accounts should be audited and the values interpreted. The major reason for this audit is that, an acquisition should be synergistic to the acquiring company so as to realize substantial value as far as the buyer is concerned (Bloomsbury Publishing 2011).In order to determine the viability of the marketing international consideration to acquire Harrington’s communication forensic audit on this company financial account has to be done. After the analysis and scrutiny, proper interpretations are made and from the interpretation a decision is made if it is appropriate to acquire the underlying company. Despite the anticipated potential benefits that the marketing international company in the acquisition of this consultancy and marketing media agency there is also increased risk compared to these underlying benefits. It is expected that the company financial burden may increase incase if the acquired company has financial burden (Fridson 2011). Therefore the financial accounts of Harrington Communication Company to be acquired should not indicate any aspect of the financial burden. It should be ascertained that Harrington communication company has rapid growth of sales and constant sustenance if clients, income and profitability (Bloomsbury Publishing 2011). This scrutiny will ensure that the acquisition is acquired in the basis of leverage with less injection of finance for higher return-on-investments (Dyson 2010). It is also important to ensure that Harrington communication company has adequate cash flow and that the down payments should be made as low as possible. Assets acquisition analysis Harrington Communications owns assets of a significant value. The company is notably young and booming and they have acquired larger assets for the last successive years. The value of the fixed assets has constantly increased for the last three years. The current assets have the same trend attributing to the overall increase in both the current and fixed assets. To fully evaluate the value of the assets it is worth to compare with its liabilities to determine the current ratio (Fridson 2011). The assets are excessive of the company liabilities; therefore it can be argued that the company is under going concern. There is no loss tax carry forward related to the assets thus the company is viable to acquisition as far as the value of assets is concerned (Hunt 2009). Liabilities acquisition analysis Harrington Communications have considerably kept its liabilities and debts low. In the period of the last three years the company has been able to keep it constant. This indicates that the company is able to service both the long term and the short term liabilities. In another perspective the current assets to the current liability ratio is favorable (Fridson 2011). The company is notably managing well its debts upon the analysis of the reconciled unpaid debt and the lender balances. In general Harrington Communications is able to manage its liabilities and this makes it to be in a position of being acquired. Equity acquisition analysis This analysis in the financial accounts of the company aims to determine who the current shareholder of the company is. There are ordinary shareholders comprising of 25 percent in the ownership list, this is the major source of income which is used to finance the company. Other finances are the retained profits by the company and this has greatly facilitated keeping low the company debts and long term liabilities. In regard to acquisition it is notable that the company has various registration obligations which need to be ratified before the process is completed (Cox 2004). Others in regard to equity are that the shareholder voting rights should be outlined and all the registration rights agreements presented. Harrington Communications has successfully kept all the matters concerning equity as provided in accordance to accounting standards. Profitability acquisition analysis For the purpose of acquisition it is important to review the target company to be acquired. Profit analysis involves tracking the trends of the business key variables to indicate the profit situation (Bloomsbury Publishing 2011). Considering Harrington Communications revenue trends for the past financial years there was a drop in the year 2011 but in the 2012, the company profits has been in a sharp increase. Sales discounts and the direct costs of the company have been kept low as compare to the total sales revenue indicating that the profitability performance of the company is good (Fridson 2011). The tax has reduced significantly over the past years attributed by the government laws and regulations. From the company profit and loss account, the company is considered profitable. Cash flow acquisition analysis This basically entails analysis of the company projected cash flows basing on the historical facts. Harrington Communications upon review of the working capital, it can be deduced that the company is doing well characterized with increased capital purchases. It is also notable that there is a favourable net cash flow before the company debts and the interest payments (Fridson 2011). Conclusion Summarizing the facts from Harrington Communications, it is not a bad consideration to acquire this company. It can be projected and predicted that the company financial performance is strengthening basing on the financial statements trends for the past three years. You Marketing International should consider acquiring at this time because of the target company performance and the attractiveness of fashion industry in UK. TASK 3: CASE STUDY ANALYSIS Introduction Harrington Communications is one of the newly set up company in Britain and for the past ten years it has realized tremendous growth in most of its business operations. This has been attributed by the increasing growth in consultancies in the fashion, beauty and lifestyle sectors where it draws its clients. Taking a critical analysis in the context of the current situation in the company, there are notable management issues at stake that need to be addressed. It is therefore upon the owner John Harrington to make an initiative of making several changes in regard to how the company is to be managed and how to relate to the employees (Huczynski 2010). Being a big company it is and it does not have a human resource department is an indication of the poor management and standards within the company. There are key notable areas of organizational management that need to be transformed or established before considering expanding. This case study identifies the key areas of management which need to be changed in order to transform Harrington Communications into a modern company in a competitive fashion, beauty and lifestyle industry. Harrington Communications Vision and Mission It is notable that the company has not developed and relevant mission or a vision statement. A company vision and mission statements adds company values and philosophy and guides all the stakeholders of the company. John Harrington being the founder of the company should have set the mission and vision statement so as to provide a strategic and social direction to the company. John’s focus on the business expansion and profitability cannot qualify to be the company vision or mission statement in the current corporate world. Because of this the company stakeholders majorly the employees are not fully converged to the achievement of the organizational goals and objectives. Absence of the company vision means that the desired future expectations in regard to the company are uncertain. Therefore the company has not been strategically shaped and that there is no effective clarity in both the departmental and individual employee objectives (Huczynski 2010). Therefore the company management team and the executive should sit down and develop a precise company vision and mission statement. Organizational structure This is an important aspect of the organization which describes how the company organizes its employees, management teams, departments and the various divisions. It is apparent that Harrington Communications have too simplified organizational structure as compared to its growth and expansion. The company has few departments excluding the human resource department which is very important (Huczynski 2010). The simplicity of this company implies that only one person is in charge with less division of labour. John being the decision maker of nearly every operation in the company interacts directly with the employees (Huczynski 2010). Therefore decisions are made and implemented quickly. Ascribing to the bureaucratic organizational structure decision making is from top to down in which the main objective is based on the perspective of the decision maker only. The organizational culture comprises of the various aspect of the company environment involving employee relationships, psychology and stress levels. John being the owner and the manager should guide on the appropriate professional code of conduct and the crafting the appropriate culture (Cox 2004). To improve this organization should establish a functional human resource department and to involve the employees in shaping the relations and the culture of the organization. In regard to the organizational structure John should adopt matrix organizational structure due to the company expansion and complexity (Huczynski 2010). John Harrington’s personality, management and leadership This entails the personal behavior of an individual and this comprises of the character and varies from one individual and another. It can be argued that John Harrington’s personality is conscientious attributed to his achievement oriented, and self discipline. This personality has transformed into being authoritarian personality. His management style can be perceived to be exploitative and authoritarian where there is unquestioning of whatever decision he makes. Notably is that he practices self human resource functions hiring and firing employees as he wish. He does not respect any of the other senior managers who deal with the clients directly (Mullins 2010). This management style maybe effective in the short run but with unfavorable consequences in the long run. John Harrington’s leadership style has been influenced by his personalities in which he adopts in achieving his goals as the owner. It can be asserted that his leadership style is authoritative thus become ineffective supervisor and a team leader. This leadership style can be transformed by the top managers including him, system analyst and other departments embracing supportive leadership (Wall 2007). This will facilitate staff satisfaction, improve working relations and reduce the staff turnover. Groups and teams As stated that the organization structure is simple, Harrington communications have simple formal groups tasked into the notable departments in the organization. The teams set include the marketing assistants and the unpaid trainees who work on temporary basis. All of the groups contribute to the success of this organization (Levi 2010). The major challenge facing these groups and teams is the lack of self-management and interference from the owner. The company can improve these groups and teams by having them have a say in decision making, setting up clear goal and objectives, freedom and openness and that communication be enhanced across all the departments for effective sharing of knowledge and expertise (Levi 2010). Staff motivation Taking into consideration the staff management, leadership style, absence of human resource and the organizational structure, it is expected that the employees are not motivated working in this company (Grenway 2008). Motivation in any workplace is important because it enhances hard work and development of energies in performing tasks. Harrington Communications have no human resource department which should focus on the needs ad the welfare of the employees. The trainees are not paid and there is no set means of motivating employees (Cox 2004). The company can address the issue of motivation by incorporating the various concepts of employee motivation theories in their systems. This can include extrinsic or intrinsic motivation styles which involves provision of tangible rewards as well as psychological rewards respectively. Conclusion Considering the financial performance of the company and the need to expand or sell the company the following alternatives can be adopted. Harrington should not sell his company because of the required transformation and changes. Since the company is enjoying profits and the booming fashion, beauty and lifestyle industry, the company should improve its management standards and compliance to the employment and government regulations. Upon the restructure in conformity with the changes in the operations and business growth, Harrington can opt to expand the company or sell it. This will ensure that the company has high share price and that it can compete in the market. REFERENCES Bloomsbury Publishing, 2011, Company Acquisitions Handbook, London: BloomsburyPublishing. Buchanan, D. and Huczynski, 2010, Organizational Behaviour- An Introductory Text. 7th ed, Harlow: FT Prentice Hall Cox, D, 2004, Business Accounts. 3rd ed, Worcester: Osborne Business. Dyson, J (2010) Accounting for Non-Accounting Students. 8th ed. London: Pearson Grenway, B, 2008, The Relationship Between Employee Motivation and Job Satisfaction, Michigan: ProQuest. Griffiths A and Wall S2007, Applied Economics, 11th ed, Harlow: FT Prentice Hall. Hunt, P. A, 2009, Structuring Mergers & Acquisitions: A Guide to Creating Shareholder Value, London: Aspen Publishers Online. Izhar, R. and Hontoir, J, 2001, Accounting, Costing and Management, Oxford: Oxford University Press. Levi, D, 2010, Group Dynamics for Teams, Boston: SAGE. Martin S. Fridson, C. F, 2011, Financial Statement Analysis: A Practitioner's Guide, New York: John Wiley & Sons. Mullins, L, 2010, Management and Organisational Behaviour, 9th ed. Harlow: FT Prentice Hall. Press, O. U, 2011, PESTEL analysis of the macro-environment, Retrieved from Gillespie: Foundations of Economics - Additional chapter on Business Strategy: http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm Worthington, I. and Britton C, 2009, The Business Environment. 6th ed, Harlow: FT Prentice Hall. Read More