Dynamics of Top Management Decision Making and Recalibration of Strategies - Coursework Example

Strategic Management Table of Contents I. Introduction 4 II. Company Overview, Position, and Strategy 5 III. Discussion and Analysis of Business Decisions Made by WRSX 7 IV. Theoretical Frameworks 10 V. Strategic Position, Strategic Choices 12 Appendix A: Performance Log 14 Appendix B: Strategic Position 15 Appendix C: Strategic Choices 16 References 17 I. Introduction Strategies evolve in response to changes in the market dynamics. This is true at the level of top management, which must navigate through changing business conditions in pursuit of business goals, such as profitability, revenue growth, and improved shareholder returns and market valuations. This paper discusses these dynamics of top management decision making and recalibration of strategies, taking into consideration market responses to those. The paper provides a discussion of decisions and the decision making processes, and contextualises the discussion from the perspective of some vital frameworks of theory relating to making decisions. II. Company Overview, Position, and Strategy Coming into the board as a new member, one gets an understanding of the key concerns of the firm. Those concerns relate to the suboptimal management of costs, the average level of financial performance over the past year, the loss of key people and the defection of some clients, concerns about improving governance in light of a corruption incident that led to the loss of some customers, and issues relating to leverage as the company had undertaken a growth and expansion strategy after years of conservatism in investments. The latter involved expanding the services portfolio and purchasing shares of the market where those were feasible (Waldron n.d.). As a mid-tier advertising entity, the strategy as discussed above is expanding the mix of services beyond traditional advertising and acquiring other assets that in essence transforms the firm into a kind of integrated and diverse marketing communications concern, with stakes in such diverse activities as filmmaking, PR, direct marketing, and even sports marketing. This diversification is the chosen strategy, even as some of the concerns also relate to costs, and to such issues as how to finance the growth and whether or not the expansion strategy makes sense in the long run. The overall goal of course is for the firm to break into the league of giants in the industry in terms of revenues and clout. This strategy moreover aims at matching and exceeding the range of services that traditional integrated advertising firms provide, as discussed in the consultant report (Mitcham 2011, pp. 9-20; Watson n.d.). Market trends augur well for an expansion strategy, given that the industry is poised for massive long-term growth, to reach more than half a trillion dollars in just a few years. Online advertising is on track to further explode, together with more traditional advertising such as direct marketing and TV advertising. There are massive opportunities for growth in emerging markets too, coupled with opportunities online and in new and emerging media, driven by advances in digital technologies and telecommunications. Online market research opportunities are large. Given WRSX’s current underweighted representation of Digital and New Media revenues, at just 6 percent of total business, and given the relatively large share of its traditional advertising services in total revenues, the opportunities line up with where WRSX can boost revenues moving forward. That said, competition is not sitting down, and WRSX needs to deal with its own internal operational and strategic challenges relating to shoring up cost efficiencies and generating new businesses in those areas where it is currently weak, such as digital and new media (Mitcham 2011 pp. 9-20; Carnelley n.d.). III. Discussion and Analysis of Business Decisions Made by WRSX In essence the exercise was one where top management tweaked strategies as they went along, in pursuit of larger business goals relating to financial performance and shareholder returns. They changed course strategically also as a response to challenges and changes posed by the external environment. Some of the changes in the external environment hindered the attainment of those those larger corporate goals. while some propelled the firm towards progress. Looking at the broad arc of business decisions and subsequent business outcomes, one can see that strategic decisions led to a steady improvement in financial performance, resulting in share prices rising more than 300 percent by the end of period 6 compared to period 0, and the market coming to put a premium on those share prices relative to the earnings of the stock, with the P/E ratio going up to close to 19 from just 15 at the start. This reflects improved market confidence in WRSX shares, even as the firm also improved on its cost efficiencies as reflected in the staff costs ratio, improved profits by the end of period 6, and improved overall scores for non-financial performance across almost all indicators from period 0 to period 6. Table 1 summarizes key performance metrics for WRSX (Mitcham 2011 pp. 9-20; Carnelley n.d.): Table 1: Key Performance Metrics for WRSX Share Price (euro) PBIT P/E Non-Financial Index Average Staff Costs Ratio Period 0 2.74 16.5 15 42.2 63 1 2.92 15.6 15.9 44.8 63.6 2 3.58 15.4 17 47.8 62.1 3 3.22 13 16.6 46.6 63.7 4 3.92 13.7 16.8 47.4 62.4 5 5.03 15 18.1 50.9 62 6 7.7 19 18.8 52.8 57.6 Graphically, the results can be depicted this way, showing improvements across the board in terms of financial results, cost containment, and in terms of averages for non-financial metrics. This is depicted in Figure 1 below (Mitcham 2011 pp. 9-20; Carnelley n.d.): Figure 1: Key Financial and Non-Financial Metrics for WRSX The bottom line is that over the different periods, the small and large strategic shifts and decisions that the board made had incremental positive effects on the company’s financials and overall performance relative to the financial goals. This is true even when PBIT and P/E went down in some of the interim periods. The proof is that the firm is better off at the end of period 6 than period 9. The positive impact of the decisions and management strategic shifts through the different periods also extend to its non-financial metrics, which are in the end metrics relating to management practices and business practices, that translate to overall organizational readiness to pursue present and future goals (Mitcham 2011 pp. 9-20; Carnelley n.d.). In particular, the positive results in non-financial indicators can be attributed to sustained moves to improve governance over the six periods. Th positive impacts of efforts to improve governance extend to the different non-financial indices: management of risk and growth, corporate social responsibility, leader capability, procurement and supplier management, and client management. The adoption of the code of governance and the removal of erring directors, as well as the further integration of sound governance practices in the different regions, played their part. Moves to dispose of businesses that were not performing, streamlining costs through outsourcing, and investing for growth meanwhile all had their positive impacts to the profitability, and that showed in the improved financial metrics above (Mitcham 2011 pp. 9-20; Carnelley n.d.). IV. Theoretical Frameworks One can argue that improvement in the non-financial indices was a function of the soundness of the decisions relating to governance during the different periods, and the improvement in the non-financial metrics as discussed above had a large bearing on the way the company was able to improve its business results and future prospects. In this context, theoretical frameworks that are relevant relate to the way ethical decisions have to take into consideration the interests of various stakeholders. Here the consideration extends beyond the obvious stakeholders, namely the shareholders, to the general public, to the suppliers and customers, and to employees. Several frameworks that were useful likewise considered long-range versus short-range interests of the firm and how sustainable various ethical stands or orientations are over the long-term. Obviously the long-term view informed the decision making for the six periods, and so at the end of the sixth period the firm had become much more successful in shoring up its performance in the non-financial metrics, such as corporate social responsibility. Had management only considered shareholders, or just considered short-term results, it is doubtful that the firm would have performed as well as it did during the six periods. The ethical frameworks suggested taking the long-term perspective, and to consider all valid stakeholders, and did not mislead at all, but led to good results (Gregory et al. 2011; Johnson and Scholes n.d.; Karas 2013). The other set of frameworks for guiding business strategy and decision making for the firm through the different periods relate to identifying areas where the firm can compete and where there are substantial opportunities for growth and profitability, and situating those opportunities within the context of internal capabilities, weaknesses, and strengths. Various strategic decisions through the six periods relied on a keen understanding of the SWOT framework as an underlying guide for the decision-making process, especially as they related to pursuing opportunities in digital media, where the firm has some strength and where the opportunities are large, and likewise for opportunities with SME’s located in Asia. Pursuing a growth strategy moreover also relied on leveraging internal strengths at optimizing and reducing costs, as well as pursuing increased revenues by doing more of those things where the company excels, in new markets and new media such as digital media (Mitcham 2011 pp. 9-20; Carnelley n.d.). V. Strategic Position, Strategic Choices What is clear from an analysis of the strategic position and strategic choices of the firm during the different periods is that while the basic position of growth and cost containment was consistent, individual strategic choices during the different periods continued to evolve as new inputs in and as new market realities came into being. Some aspects of the core strategic position, especially as they relate to governance, remained the same, but market changes likewise necessitated adopting new strategies in response to market dynamics, especially with regard to decisions on acquisitions in the west coast, backwardly integrating aspects of the business, and partnering to venture into other geographies and markets (Mitcham 2011 pp. 9-20; Carnelley n.d.). Appendix A: Performance Log Appendix B: Strategic Position The strategic position relates to the company’s overall goals to achieve growth towards becoming among the biggest firms in the advertising space, improving governance, cutting costs, and growing through acquisitions and geographic expansion, and through organically growing revenues for existing businesses (Mitcham 2011 pp. 9-20; Carnelley n.d.). Appendix C: Strategic Choices References Carnelley, A. (n.d.). WRSX External Environment- Phase 1. The Strategy Experience Simulation. Johnson and Scholes (2012). Ethical Stances. Open Tuition. [online]. Available at: http://opentuition.com/topic/johnson-and-scholes-ethical-stances/ [accessed 3/4/2015]. Karas (2013). Stakeholders, Stockholders and Corporate Social Responsibility. International University College. [online]. Available at: http://www.iuc-edu.eu/group/sem1_L2/2013%20MBR/Lecture%202-%20Week%202-%20Stakeholders%20%20Ethical%20Relationships.pdf [accessed 3/4/2015]. Gregory, J. et al. (2011). The Role of Corporate Value Clusters in Ethics, Social Responsibility and Performance: A Study of Financial Professionals and Implications for the Financial Meltdown. ASBSS. [online]. Available at: http://asbbs.org/files/2011/ASBBS2011v1/PDF/J/JinG.pdf [accessed 3/4/2015]. Mitcham, C. (2011). Advertising and Marketing Communications Industry Overview: Consultant’s Report and Recent Press Cuttings. The Strategy Experience Simulation. Waldron, J. (n.d.). Welcome to the WRSX Group. The Strategy Experience Simulation TSE Briefing Phase . Watson, T. (n.d.). Phase Two- Business Development. The Strategy Experience Simulation. Read More