Ashmita Dutta

To: Mr. PSS Sandilya From: Ms. Ashmita Dutta Re: Competitive Position and Analysis of NewAd Studios (Name changed as per the request of the Director) 26 July 2020 Introduction NewAd Studios is a boutique ad agency in India, and is relatively new in the industry (incorporated in September, 2016). According to The Era of Consumer A.R.T. by EY and FICCI 1, the Indian M&E sector is worth USD 25.7 billion, and is expected to grow to USD 34 billion by 2022 at a CAGR of 10%. According to the E4M report by Dentsu Aegis Network 2, out of USD 25.7 billion, the advertising industry accounts for approx. USD 9.64 billion, and is expected to grow at a CAGR of 11.83% upto USD 13.37 billion by 2022. The digital advertising industry that stands at USD 1.93 billion, is expected to grow at a CAGR of 27.42% to amount to USD 3.98 billion by 2022. However, owing to COVID-19, the industry has undergone further changes, both temporary and long term. Keeping the above in view, this analysis seeks to study the competitive analysis of NewAd Studios in the digital advertising industry. Critical Factors Values Purpose: Help businesses build loyalty amongst their customers. Scope: Social media and creative services for public sector organisations. With the current resources, the agency can cater to the private sector organisations similar services. In order to expand into digital advertising services, the agency will need to hire new professionals. Opportunities Market Demands: With the impact on COVID-19 on business and their budgets, the market demands as per the industry analysis in Exhibit A are as follows: • The OOH advertisement campaigns are mostly being postponed, but digital advertising is growing. According to the EY Report on ‘Impact of COVID-19 on the M&E sector’ 3, the overall impact of COVID-19 on digital media segment is fairly low, as compared to other media channels. In the near future, digital media will be on the upward curve. • Certain industries are growing during this time, and with rising competition within such industries, the need for advertising and branding is also increasing. As per the industry reports, media & entertainment, e-commerce, online banking, and health & wellness industries will see rise in consumption, and the consequence increase in digital advertising spend 4. • Brands are expected to be more empathetic towards the customers and society, and hence, are required to conduct re-branding activities. Negative messaging and aggressive competition is not accepted by the current market 5. Even though the demand for digital marketing is rising, brands are restricted by budgetary concerns. Approx. 69% of brands are expecting to reduce their ad spend in 2020 6. This creates an opportunity of boutique agencies to provide their services at a lower price than established agencies. Thus, the target market of essential and new essential industries is suitable for expansion. Competition: The agency’s current competition comprises of social media and digital marketing start-ups in India, with a revenue of less than Rs. 5 crore per annum (approx. USD 670,000). Exhibit B shows the competitor analysis of the agency 7. Owing to the current economic crisis, the primary priority of agencies is to safeguard their financial security. Further, agencies have to revamp the advertising strategies for their clients that focusses on the current situation and the gradual reopening of the economy 8. Industry: Exhibit C shows the Five Forces Analysis of the digital marketing industry in India. The industry sees a high threat of rivalry and new entrants, as well as a reasonably high power of buyers. However, there’s also a low threat of substitutes and a lesser power of suppliers in the industry. Because of high threat of rivalry and new entrants, the agency cannot compete on prices. Instead, it needs to focus on creating a niche for itself through increasing lead generation and creating agile response systems. Capabilities According to the industry requirements and the capabilities analysis of the agency (Exhibit D), the agency’s capabilities are primarily round-the-clock service, financial stability and existing multi-skilled personnel. Valuable Competitive Position According to the above analysis, the agency has the following valuable competitive position: 1. Since the agency caters to mostly public sector organisations that are under mid-term contractual obligations, it is financially secure. This is a substantial advantage in the current scenario as the most crucial priority of the competitors is to secure their current billings. The agency can use this comfortable position to prepare to deliver increased leads and more agile response systems. 2. Since essential and new essential businesses need to maintain communication with their customers, while taking into account the reduced budgets, it is feasible to divert BD activities towards mid and large-sized brands. 3. Because of increased rivalry, the agency needs to focus on creating a niche for itself by generating leads and creating agile response systems. The main aim of a business is advertising is to increase revenue. In the current scenario, there are two considerations for businesses w.r.t. advertising - sensitive & cooperative messaging by the brand and generating leads for increased revenue to survive in the market. Targeted digital advertising and increased agility of response systems are crucial for both these goals. 4. Agency positioning should be done in a manner that the business of clients is put at the top of the priority list. Exhibit A - Industry Analysis Demographic Trends Sociocultural Influences - Increased need of advertising in industries that - Increase of consumer expectations of brands to are growing during COVID-19, such as essential take a stand on cultural and societal issues. services, OTT services, gaming, FMCG. - Re-branding needed as empathetic and cooperative brands. - OOH branding reduced, but digital branding on the rise Macroeconomic Impacts - Budgetary concerns due to COVID-19, leading to brands opting for smaller boutique agencies. Political-Legal Pressures - Massive competition from larger agencies entering into the digital marketing space - Home economy is promoting Indian products (due to economic turmoil and strained relations with China), due to which Indian brands need to advertise themselves. Technological Developments - Automatising of content and social listening is increasing the software cost, but reducing the need for people Global Trade Issues - Exhibit B - Competitor Analysis In the Indian advertising industry, there are more than 1,000 digital marketing agencies. For this analysis, the competitors chosen for a comparison are those similar to NewAd Studios in terms of the following parameters: • Revenue of less than Rs. 5 crores • Incorporated after 2015 (less than 5 years old) • Headquartered in India • Less than 50 employees WHAT DRIVES THE COMPETITOR WHAT THE COMPETITOR IS DOING OR IS CAPABLE OF DOING Objectives Strategy - Providing one-stop solutions - Retain existing clients and campaigns (financial security during COVID-19) - ROI driven - Single campaigns for bigger brands Assumptions Resources & Capabilities - Key professionals from top agencies - Larger possibilities of cooperation with agencies and vendors - AI driven - Employees with previous agency experience and credibility COMPETITOR RESPONSE PROFILE - Because of the economic crisis due to COVID-19, the priority of agencies is to ensure their financial security, through retention of existing clients, pay cuts and downsizing. - Availability of established professionals in the industry allows them to cash in on their market credibility. Exhibit C - Five Forces Analysis Rivalry amongst Existing Agencies Parameter Measure of Rivalry Higher number of competitors High Higher incentive to engage in price slashing High Lower possibility of coordination amongst rivals High Conclusion: High rivalry Threat of New Entrants Parameter Measure of Threat Low cost of entry High Lack of competitive advantage to incumbents (The competitive advantage exists for larger players in the market, but not for agencies existing for less than a decade.) High No retaliation by the market towards new entries High Conclusion: High threat of new entrants Substitutes and Complements Parameter Threat of current or future substitutes of digital advertising Measure of Threat Low Conclusion: Low threat of substitutes and complements Power of Suppliers Parameter Measure of Threat Option to choose from a number of suppliers Low Transparency of information available on suppliers Low Conclusion: Low power of suppliers Power of Buyers Parameter Measure of Threat Huge number of buyers Low Low cost of switching High Transparency of information available on buyers High Conclusion: Relatively high power of buyers Exhibit D - Capabilities Analysis Core Capability: Providing research driven and result oriented advertising services Core Capabilities Social Media Marketing Digital Media Marketing Processes - Client servicing - Client servicing - Campaign development - Campaign development - Optimising reach & engagement - Optimising conversion People - Designer - Copywriter Systems - Round-the-clock service Internal Alignment - Division of work according to projects - Supervisory personnel already engaged External Alignment - Real-time updates on social media - Focus on optimum placement and lead generation - - Focus on customer perception and lead generation Sustainability - - Source: Analysis of the agency’s business reports + interviews of the current employees and the Creative Director Exhibit E - References 1. https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/media-andentertainment/ficci-ey-m-and-e-report-2019-era-of-consumer-art.pdf?download 2. https://dentsuaegisnetwork.in/uploads/digital_reports/DAN-e4m-Digital-Report-2020Web-C3.pdf 3. https://www.slideshare.net/SocialSamosa/ey-report-impact-of-covid19-on-the-mesector 4. https://e4mevents.com/pitch-madison-advertising-report-2020/public/images/PMARreport2020.pdf 5. https://www.forbes.com/sites/bridgetbrennan/2020/05/01/marketing-your-consumerbrand-during-covid-19/#668acfd03811 6. https://influencermarketinghub.com/coronavirus-marketing-ad-spend-report/ 7. https://analytics.google.com/ 8. https://www.researchandmarkets.com/reports/-/home-delivery-market-in-indiaby-goods-by-type? utm_source=dynamic&utm_medium=GNOM&utm_code=bcschs&utm_campaign=-+-+The+Home+Delivery+Market+in+India%2c-++Increasing+Consumer+Spending%2c+Changing+Consumer+Lifestyles%2c+Rise+in+ the+Number+of+Working+Women&utm_exec=joca220gnomd