Advertising Industry Analysis

This assignment delves into the advertising industry's dynamics using PESTEL and Five Forces analysis. It examines factors like rivalry, entry threats, substitute products, buyer power, and supplier power shaping the industry in 2016. The analysis explores the attractiveness of the industry and identifies key changes impacting major advertising agencies.

Case study Global Forces and the Advertising Industry

Contents
Introduction......................................................................................................................................2
PESTEL analysis.............................................................................................................................2
Five Forces Analysis for the advertising industry in 2016..............................................................4
What is the industry attractiveness?............................................................................................6
What are the changes in the industry?.........................................................................................6
Which forces are becoming more negative or positive for the major advertising agencies?......6
References........................................................................................................................................7

Introduction
The advertisement is considered important for the presentation of the ideas, services and the
goods by the recognised sponsor. The case is about how the advertisers focus on the result based
compensation, with better operating methods, developed in North America and Western Europe.
PESTEL analysis
Political:
Threats: The change in the political climate tend to form background for advertising. The
political parties are focusing on quality of ads with estimation to witness about the increased
political interest. The government policy, instability and the tax issues.
Opportunities: This is through the use by the political groups with the way to deliver better
thoughts and believes1. Through the improvement in the government, the advertisements for the
UK government is £289m in 2014. It has helped the client company to employee with better
skills, knowledge and creativity.
Economic
Threats: It is the additional expense which is loaded off which could not be used at the time of
recession, where the firms cannot invest much for better ROI.
Opportunities: Through economic growth, there is a possibility of growing the WPP organic
sales with improved accounting for 35% of the firm’s sales. In USA, $180 billion and $569
billion is spent on advertisements which is likely to bring a change in the New Year Stock
Exchange as per case study.
1 Havas Conseils, http://www.havas.com/havas-dyn/en/

Social
Threats: There is a possibility of violation of ethical laws where the government need to take
some corrective actions2.
Opportunities: There are new geographic sectors with social corporate responsibility, and
technological development. As per the CEO of WPP, there are larger advertising and marketing
services that point google with other rival agency relationships. It focusses on how the WPP
clients spend money with Google for Facebook. This example helps in understanding how one
can work in a team to achieve goals and success.
Technological
Threats: The examples are YouTube and Facebook who have the high budget with the changing
patterns in the global consumer market. They directly impact the industry dynamics and the
structure. The freelance outsource talent is reducing the requirement of the employees in the
company.
Opportunities: The internet awareness and usage are on different devices which has led to
technological advancement. There has been advancement through Google, Facebook, Yahoo,
and Instagram. The online advertisement budgets are increased with convergence of inter, TV,
smart phones and the tablets which impacts the industry.
Environmental
Threats: There are issues related to the environmental degradation due to the wastage of papers
and electricity and resources in billboards advertisement3.
2 Aithal, P. S. "Industry Analysis–The First Step in Business Management Scholarly Research." (2017).

Opportunities: The people are more inclined to the natural product and environmental friendly
options. The focus is on bringing the markets towards the innovative and ground breaking
creative campaigns that are environmental friendly as well.
Legal
Threats: The issues are on the ban of the ads of cigarettes and other materials or other explicit
content in ads. The threats are related to Intellectual Property Rights and how the labels are
conducted with the mails and telemarketing campaigns.
Opportunities: The Federal Trade Commission (FTC) in US focus on business labels and the
products conduct the mail and telemarketing mails that claims to be related to the results the
product has in health or environment.
Five Forces Analysis for the advertising industry in 2016.
a. The Degree of Rivalry
It is industry attraction where the people have the liability to determine the extent the value
which has been created by the industry. It tends to be dissipated through the head-to-head
competition4. The contribution is mainly about the how likely the industries can work on the
threats of other substitutes and existing power of the suppliers and the buyers in the market.
b. The Threat of Entry
3 MyStrategyExperience: the Strategy Simulation designed for Exploring Strategy:
https://heuk.pearson.com/simulations/mystrategyexperience.html.
4 Castro, Raúl Bartolomé. "Apple Inc.–A Marketing Success Story." (2016).

The economy of scale and the cost of entry is the investment mainly in the technology. The
distribution channels and cost advantage are about the size of the company and the contacts or
expertise. There is breakaway from the Young and Rubicam to form the agency. The WPP
acquisition has been at a majority stake with small ideas of innovation.
c. The Threat of Substitutes
The issues are with the digital search which is hovering the traditional advertising media like
Google and Facebook with paid search to discover the ads online.
d. Buyer Power
The force is based on the relative high standards where there are few or large players who work
on the retailers or the grocery stores5. The mobile ad spending like the YouTube and Twitter
have focused on the buying power of the customer with increased share to the marketer budget.
Google works on 55% of the market share of $81.6 bn that is spent on online search.
e. Power of the supplier
Here, the costs are generally switching from one to the other provider. It includes the higher
power of the brands like McDonalds, British Airways. Google, Yahoo and Facebook are
influencing the market with change in the relation to breadth of services for global reach.
What is the industry attractiveness?
The industry attractiveness is mainly about the rivalry where the different companies come up
with the differentiated products and outputs. Google, Yahoo have been focusing on
advertisements through paid promotions which has mainly been able to focus on the customers
5 Advertising Age; Omnicom Group, http://www.omnicomgroup.com

demands. The women are confident and sufficient where the advertisers need to make changes to
attract the female consumers.
What are the changes in the industry?
The changes focus on the increased cost of doing business in different organisations, with lower
reimbursements and focusing growing value based payments which are for pay-for-performance,
population health management. The changes are also related to the way of advertisement and
how the social media is working over dominating on different legacy of creative and impactful
advertising6. The companies have different standards set for a better growth and opportunity.
Which forces are becoming more negative or positive for the major
advertising agencies?
The positive forces are the threats of the rival companies and the negative forces are the power of
the suppliers, where there are issues related to limitations in selling the products.
6 Zenith, September 2015, http://www.zenithoptimedia.co.uk

References
Advertising Age; Omnicom Group, http://www.omnicomgroup.com
Aithal, P. S. "Industry Analysis–The First Step in Business Management Scholarly Research."
(2017).
Castro, Raúl Bartolomé. "Apple Inc.–A Marketing Success Story." (2016).
Havas Conseils, http://www.havas.com/havas-dyn/en/
MyStrategyExperience: the Strategy Simulation designed for Exploring Strategy:
https://heuk.pearson.com/simulations/mystrategyexperience.html.
Zenith, September 2015, http://www.zenithoptimedia.co.uk