WRSX Business Environment

Board Meeting Two

Andy Carnelley, WRSX Business Analyst

Hi, Andy Carnelley here. As you’ll remember from my previous briefing, I am a Business
Analyst reporting to the Director of Market Insights, Bjorn Krog Jensen. My role is to collate
information from different sources about what’s happening in the external environment
that I identify as strategically relevant to the WRSX Group. This of course includes
economic data and trends, as well as anything else that is happening in our industry sector
that may have a positive or negative impact on our business. My job is to give market
insight and allow timely decision-making by the Board in response to what is happening
in the external environment.

So, let’s take a look at what is happening out there.

In terms of the world economy, the latest growth forecast for this period is 2.9%. This is
a fall of 0.6% from the previous period. I need to sound a word of caution on two points.
Firstly, many well-respected economic forecasters are predicting a continued downturn in
headline worldwide growth. Secondly, there are differences between economic regions –
with the economies of Europe and the USA slowing far more quickly than those of Asia-
Pacific. Of course, a forecast is only a forecast and the world economy may do better, or
worse, than predicted.

In terms of our industry sector, there have been a number of high-profile acquisitions by
competitors in recent months. The aim of these acquisitions is to build market share, drive
economies of scale or enter new markets or sectors. Some advertising agencies have used
acquisition as a fast-track method of entry into the digital arena.

Like most growth-orientated companies, WRSX is always considering acquisition

opportunities. An advertising and marketing services group like WRSX can grow
organically – by acquisition or by strategic alliance – but the market, the mechanism and
the cultural and strategic fit for each of these options always have to be carefully
considered.

In what could be a difficult time for the advertising and marketing communications sector,
advertising agencies are working to raise their profiles among potential clients. Here at
WRSX, there has been some discussion among top management about how we advertise
and market our own services to potential clients. I am sure that I do not need to lecture
the Board about choosing the correct mix of media and messages. Some media are more
effective than others for an advertising group such as WRSX.

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We do have an active public relations and advertorial campaign in business and
professional magazines, but this may not be enough in raising the awareness of our own
brand and what makes us different. So how we attract new clients in what looks likely to
be an economic downturn is an issue.

Equally, we must put in place plans to ensure that we retain our existing clients. As has
been reported both in the Financial Times and Campaign magazine, the number of client
companies moving their business from one advertising group to another, known as client
churn, has reached an all-time high. There is extreme competition among advertising
agencies to attract new business.

So in order to differentiate ourselves, we have conducted research recently which has

shown that clients are looking for the following: breadth of advertising and marketing
services, effective advertising that increases market share, value for money and a
mutually beneficial client/agency relationship. Client retention is key to on-going financial
success for our business.

One aspect of client retention that needs some focus is how we use the experience and
knowledge in one part of the business to add value to other parts of the business. We
have a great deal of knowledge within the group, through the different service companies
and regions. But all too often, we discover this after the event and we do not bring this
knowledge to projects at the time. So there is a real question of how we use this knowledge
better to our advantage.

In the wake of the various corporate scandals in the past few years, the Board will be
aware that there has been a focus on the issue of corporate governance in the international
press and TV channels. The reason is that we have come through a period where
shareholder returns have been ahead of historic numbers but now there is real scrutiny
around corporate governance and I flag this up to the Board as an issue we need to keep
under review in the coming months.

On a final note, the WRSX Board was delighted to hear that, after a long and rigorous
investigation, Raphael Roux, our Group CEO, was found to be innocent of any involvement
in the bribery scandal that rocked the company recently. He is now back in his post and
working with the rest of the Board on the important task of making sure WRSX delivers
exceptional value to our clients – and of course our shareholders.

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