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I. Introduction The UK advertising industry has been at the forefront of the global market for several years now and is set to stay that way. The reason the advertising industry in the U. K has become world leader is due to a number of factors, primarily due to the strong economic structure in the U. K at present, but also a result of a number of political, economic and commercial events that have required active promotion. British advertising has gained a reputation over the past years as being the worlds most creative and effective, with adverts such as the Tango campaign, Hello Boys and Levis pushing the industry to the forefront.
II. Market Analysis 2. 1 Market Size The UK advertising market is a growing market; between 1992 and 1999 the advertising expenditure rose by 171 % to exceed 15 billion in 1999 for the first time. The following graph illustrates the strong growth this market has experienced. Source: Advertising Association Key events that were partly responsible for this development were the Millennium, the Sydney Olympics 2000 and the launch of Digital Television in the UK. The enormous competition in new technology market such as Internet or mobile phones is also a reason why advertising expenditure increased so strongly. Market forecasts predict a further growth; expenditure is prognosticated to increase by 60 % by 2004 so that the market value would reach 19 billion. (Euromonitor 2000) 2. 2 Market Segmentation In 1999, Newspaper and Television advertising's are with the biggest market segment, they totally account for 58 % of the total expenditure.
It is followed by Direct mail with 12 %. All sectors have grown constantly since 1993 and further increase is expected for the future. The introduction of digital television and the emergence of more private channels could result in a much stronger growth in this sector. Appendix 1 and 2 and 3 illustrate the growth in the different segments with a graph and a table. 2. 3 Porters Five Forces Rivalry between existing firms There is intensive rivalry in the market because agencies need constantly to win new accounts. The normal procedure is that agencies pitch for new business, but even for existing accounts clients often demand a reich. Accounts of important clients are worth millions of pounds and agencies compete directly with each other therefore rivalry is an important factor in this market.
Threat of new entrants Clients organise pitching and switch agencies regularly to ensure that their chosen agency offers the best and most creative strategy for their campaign. This means that in this market is always room for innovative new entrants, because clients look for new input. Because winning clients and accounts requires creativity and new ideas small agencies have a chance to compete with the big players. Threat of substitute products This part of Porters forces does not comply with the market for advertising agencies. A possible development could be that companies decided to move their advertising business in house, but this is a very unlikely possibility because companies need the creative input of different source. Bargaining power of suppliers There are several key suppliers in this market; the most important are mailing services, communications companies, outside space providers and media companies.
The big media conglomerates such as Granada Group PLC, Pearson PLC and BSkyB are major sources of advertising space and can therefore dictate the prices for this to a certain extent. (Keynote) Bargaining power of buyers The buyers, which are the clients of advertising agencies, are in a powerful position, because they can pick the agency, which suits them, best. Because agencies are usually paid about 15 % of the billings there is not so much bargaining about the fees but more competition which agency gets the account at all. 2. 4 STEP Analysis Socio cultural factors Population: 59. 511. 464 (July 2000 est. ) Age structure: 0 - 14 years: 19 % (female 5, 572, 189; male 5, 843, 192) 15 - 64 years: 65 % (female 18, 723, 583; male 18, 935, 931) 65 + years: 16 % (female 5, 471, 383; male 3, 748, 841) (July 1995 est. ) Ethnic divisions: English 81. 5 %, Scottish 9. 6 %, Irish 2. 4 %, Welsh 1. 9 %, Ulster 1. 8 %, West Indian, Indian, Pakistani, and other 2. 8 % Religions: Anglican 27 million, Roman Catholic 9 million, Muslim 1 million, Presbyterian 800, 000, Methodist 760, 000, Sikh 400, 000, Hindu 350, 000, Jewish 300, 000 (1991 est. ) Literacy: 99 % of the total population can read and write (1991 est. ) These factors are important for agencies when they conduct the creative work of developing campaigns. It must be taken into consideration, that many UK agencies operate internationally and that many target countries may have a very different socio cultural environment. Technology The emerge of digital television (TV), satellite, cable and multichannel terrestrial TV is providing additional media space.
The advertising industry is embracing new electronic media like the Internet and needs technically skilled employees to exploit and use the new media. Web advertising is expected to become increasingly popular, with an estimated 150 million connections to the Internet by the year 2000. The use of Wap phones is very popular in the UK and it can also provide additional media space. Economy The UK is one of the world's great trading powers and financial centres, and its Economy ranks among the four largest in Western Europe.
National product: GDP - purchasing power parity - $ 1. 29 trillion (1999 est. ) National product real growth rate: 1. 9 % (1999 est. ) National product per capita: $ 21. 800 (1999) Inflation rate (consumer prices): 2. 3 % (1999) Labour force: 29. 2 million Unemployment rate: 6 % (1999) Fiscal year: 1 April - 31 March (source: web) Political (Legal) The general deregulation of the media, in particular television has helped to make advertising easier and increased the available space. The UK remains a major advertising market with a variety of media outlets, comparatively lax legislation and a many major fast-moving consumer goods (FMCG) producing companies. Infrastructure Telephone: 2, 1 people per telephone line Mobile phone ownership: 46 % (2001) Radio: 70 million radios in the UK Television: 2, 3 people per receiver Broadcast stations: 207 (source: Pocket World in Figures, 1999) The good technological infrastructure determines the way of advertising agencies must take advantage of the variety of media. 2. 5 Competitor Analysis The marketplace: Agencies offer selling advertising space and diverse creative services (copywriting and artwork). As far as performance is concerned, the advertising industry must take into account: Billings and turnover. Definition: Billings: Value of media time or space purchased Turnover: the turnover includes flat fees, commissions, retention and per-job fees. (source: keynote) Three different kinds of firms exist: Full service agencies provide: Planning Creative services Production of advertisements Media buying Besides the traditional developing of advertising campaigns, these agencies are diversifying by providing additionally other promotional services, which relate to the campaigns. Media Independents They focus on media buying and are not involved in the creation of campaigns.
Holding companies Holding companies are powerful due to their size and financial standing. They own many agencies and media businesses therefore they dominate the market. Advertising and promotion: Most agencies do not advertise their services themselves. However, various ancillary businesses such as market research and media space sellers do advertise to attract both media buyers within agencies and clients. Top ten Advertising Agencies Companies Market Share (1999) 1997 Part of their clients Turnover (m) Pre-tax profit (m) Abbott Mead Vickers plc 4. 5 431. 3 16. 2 British Telecom, Sara Lee, Volvo, Prudential and Pepsi-Cola. BMP DDB Ltd 3. 0 365. 3 6. 3 Barclaycard, the Labour Party, Volkswagen, Sony Reuters and Volvic.
Saatchi & Saatchi plc 2. 7 1, 978. 7 796. 4 Procter & Gamble, Toyota, DuPont, General Mills Delta Airlines, Lloyd...
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Research essay sample on Socio Cultural Advertising Agencies
