Art and Communications Counselor Inc.

Art and Communications Counselors Inc.

February 2018

Definition of Success & Critical Issues

Arts & Communication Counselors Inc. (“A&C”) must achieve a sustainable growth^[1] of 15% while maintaining a profit margin of at least 4%^[2] for the next three years.

Bonnie Hillman, President of A&C, must decide on a business strategy for FY 2009 that will resolve the declining profitability over the last two years. To make a decision that can align the strategy with the business and sustainable growth, A&C must consider:

• Leveraging Hillman’s expertise in corporate communication and strong business connections to expand on service offerings
• Its current market share could be seized by the intensifying generic competition and go out of business due to potential obsolescence of A&C’s value proposition

Situational Analysis

There is a rising need for full-service marketing agencies, evident by Bacardi Limited’s demand for public relations services in addition to sponsorship and experiential marketing services. Sourcing multiple agencies for different services could potentially expose Bacardi Limited to multi-prime contract risks. Cavignac & Associates states these risks can include, “increased delays, disruptions, costs, and errors and omissions among others.” (n.d.) Therefore, there is a critical opportunity for A&C to capture by expanding its service offerings. Hillman can leverage her reputation and experiences as a Director of Corporate Communicator to develop a public relations division at A&C. However, in approaching this opportunity, Hillman has concerns for the potential effects this expansion could have on cash flows and overall profitability.

The value proposition is obsolete because the company's lack of public relations service offerings, A&C faces volatility in securing its Grey Goose Vodka contract, which represented about $315,281, or roughly one-third, of gross revenue in 2008. The contract could easily be absorbed by the alternative PR company Grey Goose had hired. Additionally, competition persists not only from public relations agencies, but also from the backward integrations of the clienteles, with marketing activities now being performed in-house to cut costs. In response to government spending cut, art and culture organizations are establishing their own sponsorship departments. These departments are becoming total budget competitors for A&C that detract from the revenue stream. This is a critical threat for A&C because the company could suffer a loss close to one-third of revenue, during a year when there are projections for an 89.5%^[3] decrease in cash when comparing 2008 actuals to 2009 projections. This would derail their recent improvements through projections of a 643.4% growth in EBIT for 2009, after having experienced a 118.2% decrease from 2007 to 2008 (Exhibit 2).