Market Performance of Scholz & Friends Advertising Agency - Essay Example

?International Business The report includes a brief overview about an advertising agency d Scholz & Friends of Germany. It intends to provide the company, Scholz & Friends an understanding regarding the most appropriate form of market entry in the Chinese market. It also includes a detailed analysis of the market of China prior to penetrating it. It is conducted with the help of various management techniques such as PESTLE analysis, Porters’ five force analysis along with SWOT analysis. It helped to accomplish an explicit idea both about the country and industry as well, which proved quite beneficial for Scholz & Friends. Apart from this, on the basis of the analysis, with varied tools, certain recommendations are also provided to the management of the organisation. It is essential in order to enhance the productivity and the prosperity of Scholz & Friends. Moreover, it would also enhance the brand association and distinctiveness among other evident players in the market. Table of Contents 1 Abstract 2 3 Introduction 4 Analysis 5 Overview of Scholz & Friends 5 Analysis of China Market 6 Market Overview 6 Trend Analysis 7 PESTLE Analysis 7 Porter’s Five Forces Analysis 10 SWOT Analysis of China Market 12 Recommendation 14 Conclusion 14 References 15 Bibliography 19 Appendices 20 Introduction The rapid pace of globalisation and industrialisation enhanced global affiliation among various intercontinental regions resulting in reduction of trade barriers leading to upgradation of international business. Moreover, globalisation also enhanced the economic growth of the varied developed and developing countries along with improvement in business activities due to free trade opportunities (Wang, n.d.). International business is referred to industrial or mercantile dealings that take place among two or more areas, countries or nations beyond political periphery. International business includes exports and imports activities as numerous products and/or services are transferred from one region to the other. The prime objective of an organisation to undergo global business is to enhance its market share along with its corporate image. The other key aim of international business is to augment organisational productivity and profitability (Wang, n.d.). Subsequently, international business helps an organisation to extend its credibility and identity all over the globe in order to enhance its reputation. Hence, enhancement of international business amplified the need of promotional activities resulting in wider scope for advertising agencies. An advertising agency mainly deals in service industry which attempts to create and to promote inventive ideas and thoughts such as Scholz & Friends. The prime objective of any advertising agency is to encourage and to convince consumers regarding commercial offerings. Advertising agencies like Scholz & Friends also attempts to reassure employees or shareholders about the success of any organisation (Scholz & Friends Group GmbH, 2010). The report mainly focuses on varied features and importance of Scholz & Friends in a brief way. Along with this, it also highlights varied attributes of international business and a detailed analysis of Scholz & Friends is also shown with the help of diverse techniques such as PESTLE analysis, Porter’s five forces analysis and SWOT analysis. In addition, various recommendations are also provided in order to enhance the growth and the development of Scholz & Friends. Analysis Overview of Scholz & Friends Scholz & Friends is one of the reputed advertising agency groups in Europe. It was established in the year 1981 with an alliance of 48 friends. The head office of Scholz & Friends is situated in the region of Berlin of Germany (Scholz & Friends Group GmbH, 2010). The company i.e. Scholz & Friends was originated in Hamburg by Jurgen Scholz and many others so it was named such. It is known as one of the most imaginative agencies of Germany and hence is ranked, number one by trade journal Horizont. Due to high brand image and inimitability, Scholz & Friends includes about 200 clients and a strongly efficient team of 800 employees, which leads to the success of the agency (Scholz & Friends Group GmbH, 2010). Scholz & Friends includes varied remarkable and loyal clients namely Vodafone, Unilevere’s Rexona and Opel among others (Adage, 2012). The main aim of Scholz & Friends Group is to develop and design varied attractive advertisements in order to draw large range of customers and to retain its brand portfolio. Scholz & Friends also offers varied types of operations such as design, mobile marketing, event marketing, database management, public affairs, public relations, branded entertainment, and werbung among others (Scholz & Friends Group GmbH, 2010). Scholz & Friends agency is also known for a team of inventive and imaginative individuals, whose main objective is to convince the customers about the benefits of a particular product and/or service in order to increase the total sales of the organisation. For this creative thinking, Scholz & Friends has won numerous awards, which augmented the position and uniqueness in the market of Germany (Scholz & Friends Group GmbH, 2010). Thus, it can be affirmed that Scholz & Friends is a highly inventive and flourishing organisation. Analysis of China Market Market Overview The economy of China is growing rapidly and so the advertisement market is also on a constant trail of development. This is mainly due to augmentation of consumerism along with entrance of various international brands. For this reason, there are varied lucrative opportunities for the advertising agencies in the market of China. The advertisement industry of China is evolving at a rapid speed in recent era. It has developed from a very small-scale industry to a full-fledged business sector with high growth prospects. The advertisement industry of China enhanced due to its creative aspects which helped to transform itself from a niche market to a global scenario (Scribd, n.d.). Thus, it can be affirmed that China market would prove to be beneficial for Scholz & Friends in future days. Trend Analysis China is considered to be one of the most demanding and stirring media market in global perspective due to its high population size, intricacy and diversity. For these reasons, the advertisement sector includes high chances of growth and development. Besides, in recent period, due to the introduction of information technology, the passion for online media has enhanced thereby increasing the demand for online advertisements. The online advertising sector of China encompasses mainly many categories such as search engines, video, online community, vertical site advertising and portal which are the most favourite types (Scribd, n.d.). Hence, Scholz & Friends should offer high concentration on online advertising tactics and designs to enhance its brand status. PESTLE Analysis In this part of the report, the advertising market of China is analysed in a detailed way with the help of PESTLE analysis in order to evaluate both internal and external factors. Political Factors Political factors offer high influence on the prospects of the business. Prohibitation of surrogate advertisements by the government of China presented high impact on the total revenue of the advertisement companies (Scribd, n.d.). On the other hand, deregulation of FM radio might also hinder the growth prospects of varied advertisement agencies in China market by providing attractive commercials at convenient price (Vanderbilt University, 2004). Thus, Scholz & Friends should attempt to offer more attentiveness in order to cope up with this challenging issue. Economic Factors In this era of modernisation, the rural income of China also offers a significant influence over the economic growth of the economy (Wang, n.d.). The rapid increase of income rates also enhanced the total Gross Domestic Product (GDP) of the economy thereby improving the living standards of the rural citizens. Thus, rise in GDP also amplified the opportunities for advertisement agencies (Bloomberg L.P, 2012). It can be highly valuable for Scholz & Friends. Social Factors The introduction of internet has mainly enhanced the craze of the youth of the country i.e. China. Thus, the young generations are the prime customers for the advertisement agencies like Scholz & Friends in China market. The company needs to keep in consideration the aspect of tastes and preferences of this segment of customers in order to establish their niche in the Chinese market. It would help in increasing the extent of customers through public relations, which is highly advantageous for a new entrant like Scholz & Friends (Scribd, n.d.). Technological Factors Utilisation of information technology augmented the pace of online advertising, which is a considerable factor for the advertisement agencies like Scholz & Friends. Internet invention also enhanced the escalation prospects of animation industry, which is again advantageous for Scholz & Friends. Growth in the animation industry also resulted in the launch of varied digital and graphic invention techniques, which acted as the driving force for advertising agencies (Scribd, n.d.). Legal factors Although the laws and the regulations of Chinese government are quite business-friendly but all the entrepreneurs and the new entrants should obey the business norms. The business dealings should be conducted in an ethical way so that those do not hamper the customs of country. Moreover, every business owner like Scholz & Friends should also attempt to follow the bureaucracy of the government as well in order to augment the dealings of the industry (Media.Wiley, n.d.). Environmental Factors The rate of pollution is quite high in case of Chinese economy, which is quite hinderous for the human civilisation. The concentration of Carbon Dioxide (CO2) is enhanced by 383 parts per million (ppm), which is a major threat for the economy. For this reason, the industries operating in Chinese market always attempt to utilise varied inventive equipments in order to reduce carbon footprints (Wen, 2009). Thus, from the above discussion, it can be revealed that China can be a favourable market for Scholz & Friends. Porter’s Five Forces Analysis Porter’s Five Forces Analysis is also the other considerable technique which can be utilised for analysing a particular market. Bargaining Power of Buyers Bargaining power of buyers in the market of China has increased at a rapid speed due to the improvement in the income earnings. The power of purchasing also enhanced due to reduction in the exchange rates of renminbi or CNY (?) by the government of China (Gang, 2008). In addition, due to the presence of large number of substitute organisations, the switching cost of the customers is also comparatively moderate. Hence, it shows that the bargaining power of the buyers is quite high (Gang, 2008). For this reason, Scholz & Friends needs to offer various innovative designs and ideas in order to retain its position among other apparent players in the market of China. Bargaining Power of Suppliers The bargaining power of the suppliers is quite lower due to deficiency of creative advertisement talents in the market of China. Other than this, experienced candidates are also not significantly available, which influences the purchasing power of buyers to a certain extent. Therefore, all the major advertising agencies attempt to offer varied types of training and development programmes in order to enhance the imagination power and competence (Scribd, n.d.). Hence, Scholz & Friends should also follow the above mentioned facts in order to sustain in the market of China. Intensity of Competition The market of China is highly competitive as it includes varied renowned advertisement companies namely Saatchi & Saatchi China, AVIC Culture Co., Ltd, Shanghai Advertising Company and Beijing Dentsu Advertising Company (Amnesty International, 2009). As a result, the degree of rivalry is extremely intense among the players (Market Publishers, 2012). Hence, in order to establish its identity, Scholz & Friends should attempt to offer value added services at an efficient cost. Threat of New Entrants The threat of new entrants is quite low due to the presence of major dominating players in advertisement sector within the market of China. The high brand attributes of all major advertisement companies in China market reduces the prospect of entrance of new companies (Scribd, n.d.). Thus, Scholz & Friends should utilise inventive techniques in order to establish its business operations in a successful way. Threat of Substitute Products Due to a significant number of competitors in China, the propensity of the customers towards other substitutes would increase resulting in downfall of brand loyalty. It would also result in lowering of customer responsiveness along with total revenue of the organisation. The quality of the services would also decline resulting in lowering of efficiency of the organisation (Scribd, n.d.). Thus, Scholz & Friends should offer various innovative services at a reasonable price to maintain customer reliability. Thus, from the above description, the industry of advertisement in the market of China can be revealed in an explicit way. SWOT Analysis of China Market Strengths The prime strength of China market in case of an advertising agency is the scope for utilisation of varied categories of promotion such as vertical site advertising, portal advertising, mobile and online video advertising and search advertisings, which are highly advantageous for a new entrant like Scholz & Friends. Furthermore, high purchasing power of the customers due to improved income rates would also prove beneficial for Scholz & Friends (ExploreGeorgia.Org, n.d.). Weaknesses The key weakness can be the presence of a number of major market players such as Shanghai Advertising Company and Saatchi & Saatchi China among others. The recent economic downturn can also create certain weaknesses in the market of China for Scholz & Friends in terms of reduced demand of advertisement for a certain period of time from a few sections of business sector (Scribd, n.d.). Opportunities The opportunities of growth for online advertising are extremely high in China market due to the increased craze for internet along with 3G mobile technology. In addition, the market of China also includes higher prospects for broadcast television and print media as well which have shown a growth of 15.2 percent as well as 17.8 percent on a YoY basis respectively in the year 2010 (Research and Markets, 2012). Threats If the switching cost of the customers increases then it can be a business risk for the advertisement agencies like Scholz & Friends (Scribd, n.d.). Recommendation According to the above findings, it can be recommended that the market of China would prove highly advantageous for Scholz & Friends, but, it should continue to offer innovative services to its customers. This can help to retain its brand personality. Conclusion Scholz & Friends in the market of China should offer highly innovative advertising prospects to its customers in order to retain them. In order to do so, Scholz & Friends should offer extensive training programme to its employees. Moreover, it should also provide high attention towards online advertising as it includes high growth prospects. Scholz & Friends can derive major growth prospects and attain sustainability in the market of China if they are able to demonstrate their creative capabilities in the market of China. It can enable them to attain the preference of the China consumers and increase their customer base by a large extent. References Amnesty International, 2009. Doing Business in China: The Human Rights Challenge. China: World Economic and Manufacturing Centre. [Online] Available at: http://www.amnesty.ch/de/themen/wirtschaft-menschenrechte/doing-business-in-china [Accessed April 16, 2012]. Adage, 2012. WPP Buys Commarco, Parent of German Agency Scholz & Friends. Global News. [Online] Available at: http://adage.com/article/global-news/wpp-buys-commarco-parent-scholz-friends/227081/ [Accessed April 16, 2012]. Bloomberg L.P, 2012. China Rural Incomes Rising Most Since '84 Show Lure for Job-Seeking Obama. Bloomberg News. [Online] Available at: http://www.bloomberg.com/news/2011-01-20/china-rural-incomes-rising-most-since-84-show-lure-for-job-seeking-obama.html [Accessed April 16, 2012]. ExploreGeorgia.Org, No Date. Doing Business in China. Market Overview. [Online] Available at: http://www.georgia.org/SiteCollectionDocuments/Business/International/GC_trade_DoingBiz_China.pdf [Accessed April 16, 2012]. Gang, Y., 2008. Renminbi Exchange Rates and Relevant Institutional Factors. Cato Journal, 28, 2. Market Publishers, 2012. Market Report Database. Advertising Agencies in China. [Online] Available at: http://pdf.marketpublishers.com/ibisworld/advertising_agencies_in_china.pdf [Accessed April 16, 2012]. Media.Wiley, No Date. So You Want To Do Business In China. Dealing With the Government and Laws. [Online] Available at: http://media.wiley.com/product_data/excerpt/94/04700492/0470049294.pdf [Accessed April 16, 2012]. Research and Markets, 2012. China Advertising Industry Report, 2010-2011. Reports. [Online] Available at: http://www.researchandmarkets.com/reports/1848961/china_advertising_industry_report_2010_2011 [Accessed April 16, 2012]. Scholz & Friends Group GmbH, 2010. Scholz & Friends. Overview. [Online] Available at: http://www.s-f.com/group/en/aboutus/numbersandfacts/ [Accessed April 16, 2012]. Scholz & Friends Group GmbH, 2010. Scholz & Friends. Kampagnen von Scholz & Friends. [Online] Available at: http://www.s-f.com/group/de/creation/cases/ [Accessed April 16, 2012]. Scholz & Friends Group GmbH, 2010. Scholz & Friends. Kunden. [Online] Available at: http://www.s-f.com/group/de/clients/ [Accessed April 16, 2012]. Scholz & Friends Group GmbH, 2010. Scholz & Friends. The Orchestra of Ideas. [Online] Available at: http://www.s-f.com/group/de/aboutus/ [Accessed April 16, 2012]. Scholz & Friends Group GmbH, 2010. The Orchestra of Ideas. Unser Orchester der Ideen. [Online] Available at: http://www.s-f.com/group/de/orchestra/ [Accessed April 16, 2012]. Scribd, No Date. China Online Advertising Industry Growth and Forecast 2016. Industry Growth. [Online] Available at: http://www.scribd.com/doc/69735904/China-Online-Advertising-Industry-Growth-and-Forecast-2016-ToC [Accessed April 16, 2012]. Scribd, No Date. Advertising. Surrogate Advertisements. [Online] Available at: http://www.scribd.com/doc/69014310/Advertising [Accessed April 16, 2012]. Vanderbilt University, 2004. Radio Deregulation And Consolidation: What Is In The Public Interest? Radio Today — An Overview. [Online] Available at: http://www.vanderbilt.edu/curbcenter/files/Radio-Deregulation-and-Consolidation1.pdf [Accessed April 16, 2012]. Wang, D., No Date. Rethinking the Source of Rural Income Growth in China. Trend of Rural Income Growth, 1978-2009. [Online] Available at: http://www.rimisp.org/FCKeditor/UserFiles/File/documentos/docs/sitioindia/documentos/Ppt_Dewen_Wang.pdf [Accessed April 16, 2012]. Wen, D. J., 2009. Climate Change & China: Technology, Market and Beyond. Focus On The Global South. [Online] Available at: http://www.ifg.org/pdf/occasional_paper6-climate_change_and_china.pdf [Accessed April 16, 2012]. Bibliography Shenkar, O., 1993. International Business in China. Routledge. Tian, X., 2007. Managing International Business in China. Cambridge University Press. Appendices SWOT Analysis Strengths: Scope of many advertisement categories such as vertical site advertising and mobile advertising Weaknesses: Many market players, economic downturn Opportunities: Prospects from Internet and 3G mobile technology, growing trend of television and print media Threats: Switching cost of customers Porter’s Five Forces Analysis Buyers Power: large number of alternative products, Decline in the exchange rates of renminbi Suppliers Power: Deficit of creative advertising abilities Intensity of Competition: High, due to many players in the market Threat of New Entrants: Low, due to good brand image of major companies Threat of Substitute Products: High, due to presence of large number of competitors Read More