Business Proposal

1. Sterling Cooper Draper Pryce Advertising 1271 Madison Avenue New York, CA 10029 SCDP@Advertising.com 6467150823

2. Group 5 Page 2 Executive Summary The Company Sterling, Cooper, Draper & Pryce Advertising (SCDP) is an advertising agency located in New York City since the early 1900’s. The company can be found online at WWW.SCDPAdverstising.com and can be contacted by phone, 6467150823, or by email at SCDP@Advertising.com. Mission and Goals The mission at SCDP is to provide innovative marketing concepts and creative solutions for the clients. SCDP assists clients in achieving their marketing goals and public appearance. In the next one to two years, SCDP plans to be leading in delivering marketing solutions to clients and form partnerships with multiple media companies. SCDP will maximize their potential growth by providing quality, professionalism, and targeting markets. In the next five years, SCDP plans to increase revenue by 20 percent. Company and Management SCDP consists of employees that include the Founder, Beltram Cooper, then the CEO and CFO, Roger Sterling and Lane Pryce, and down to the executive team, which is above the head of accounts, creative director, head of media, and office manager. Under the upper management are the support team, artists, assistants, and surveyors. SCDP offers a functional structure; their employees all play key roles in making the company run smoothly. Employees are encouraged to express ideas and in return the company can offer differentiation in their products and services.

3. Group 5 Page 3 Services SCDP provides advertising and marketing solutions to their clients through innovational ideas. A variety of clients are publically represented by SCDP through a variety of media and print sources. Market and Opportunity In New York City, SCDP has high competition with other advertising companies, so SCDP must be unique with their methods. SCDP surveys to find the targeted markets and current trends, then utilizes that data to create new ideas and focus. By maintaining a competitive advantage, SCDP is able to compete and maintain their core competencies while utilizing their resources and capabilities to grow and increase profits. SCDP plans to build in the next in Los Angeles, Shanghai, and Tokyo by 2020. Financial overview SCDP will gain tremendous financial security by engaging in the expansion in Los Angeles, Tokyo, and Shanghai through the method of capital investment. Research suggests that marketers are expecting to spend $540 billion dollars globally on advertising this upcoming year. With SCDP being larger and in more geographic locations, SCDP will be able to accommodate a larger clientele. In 2015, the total revenue for SCDP was $5.3 billion. Currently due to various expenses during the year, SDCP has accumulated nearly $1.77 billion in gross income. By SCDP increasing their customer base globally, there will be sustainable profitability and future economic growth. Conclusion

4. Group 5 Page 4 SCDP has grown over the last 90 years from a small advertising agency to a well known experienced agency to take business to. Currently, our company has many large companies as clients and plans to continue to grow.

5. Group 5 Page 5 Table of Contents Executive Summary Page 2 Mission Statement Page 5 Company Goals Page 5 Strategies to pursue Page 7 Company Leadership/Structure Page 9 Ethics/Culture Page 11 Internal Environmental Analysis Page 14 External Environmental Analysis Page 16 Market Analysis Page 20 Competitive Advantage Page 23 Growth Strategy Page 25 Financial Analysis Page 26 Implementation Page 26 Conclusion Page 31 References Page 33 Appendices Page 34

6. Group 5 Page 6 Mission Statement Sterling, Cooper, Draper & Pryce Advertising (SCDP) is committed to providing excellence in deliverance of results, public relations, and marketing to our clients by excelling in customer services and providing innovative marketing concepts. SCDP is here to assist clients in achieving their marketing goals and strategic communications by providing counsel and creative solutions while providing the highest professionalism and experience. Company Goals & Objectives ● Leading in delivering marketing solutions that will transform brands and grow businesses. ● Utilizing all forms of media by partnering with television, internet, and printing companies to increase advertising capabilities. ● Maximizing potential growth by providing quality solutions to companies with advertising by creating ideas with innovation and creativity. ● Developing targeted markets that are agencies specialized in areas ranging from businesstobusiness communications to demographically targeted marketing focused on women. ● Utilizing the full potential of a product, service, and provide truthful information to the targeted market to decrease potential confusion or hostility towards the marketed company. ● Increasing our revenue by 20% over the next 5 years.

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8. Group 5 Page 8 Strategies to pursue Business Level Strategy At Sterling, Cooper, Draper & Pryce Advertising (SCDP), our main concern is to enhance the wealth of our stakeholders and not our shareholders alone. In order for us to achieve this goal, we strive to offer our services using a focused differentiation strategy. By implementing this business level strategy, we can better maximize our companies core competencies to develop into sustainable competitive strategies. These strategies, along with our mission and goals, are what makes SCDP Advertising a successful advertising agency. SCDP Advertising offers services that are much more distinct than our competitors. At our company, we strive to offer innovation and creativity along with our marketing services. This ability allows us to offer more value to our clients. In return, we are able to achieve higher than average returns. Marketing in itself is a very competitive market with few industry leaders; we will focus our capabilities to target a focused market. This market includes clients that are open to the newest methods available and are as innovative as we are. Many of the clients in this market pool are high capital firms with a strong focus in marketing which allows our clients to pay a premium in return for our added value. When clients come to SCDP Advertising, they are receiving the added value through creativity and innovation to achieve their marketing needs. This focused market yields higher than average returns for our stakeholders and our clients. The focused differentiation strategy gives us a broad spectrum of benefits. One of these benefits is a rivalry advantage. The added value to our services gives us a price insulation against our competitors making us more resistant to the external market environment. SCDP Advertising is also more resistant in becoming a substitute because of customer loyalty. Our clients are loyal

9. Group 5 Page 9 because we offer them a service more innovative and creative than our competitors. The strong loyalty makes it less likely for our clients to look for substitution from a competitor. Our focused differentiation strategy has allowed SCDP Advertising to grow as an industry leader. Our brand name has developed a loyalty among our clients and has allowed us to establish long term capital assets. With a reliable market pool, high capital assets, and our company strategies, SCDP Advertising has remained in the industry for over half a century and will continue to do so. Corporate Level Strategy Sterling, Cooper, Draper & Pryce Advertising (SCDP) pursues a dominant business diversification strategy. This strategy allows us to focus our resources and capabilities into developing our marketing services. The strategy has allowed us to innovate our services and add value in exchange for a premium price. Our revenue is generated primarily through our dominant business of marketing services. SCDP Advertising is the dominant business. The low diversification strategy allows our company to allocate resources to develop our core competencies into sustainable competitive advantages. Our sustainable competitive advantages in turn allow us to generate higher than average returns for a long term period. Though there are some risks with a low diversification strategy, our firm insulates itself from these risks through two different methods. One method is by using the higher than average returns and converting them in high capital assets. These assets allow us to have liquidable assets as an insulator to market fluctuations. The second method of insulation derives from the fewer managerial challenges we face due to our dominant business strategy. Because we focus on one firm, we are able to perfect our management strategy that in return allows our company to run

10. Group 5 Page 10 smoothly and efficiently. A strong management with less complications makes our company less prone to internal duress which can catalyze diversification risk. At the moment, this corporate level strategy of a dominant business diversification has allowed SCDP Advertising to grow and be successful at providing marketing services. International Strategy Sterling, Cooper, Draper, & Pryce Advertising (SCDP) currently is based off a single location in New York City, but operates with clients on an international level. To operate efficiently and maximize revenue, our company operates with an international business level strategy. The approach we take is a transnational approach. Our firm’s goal is to achieve global efficiency and local responsiveness through this strategy. To achieve global integration, our company is currently looking at an expansion growth strategy which will set up strategic business units globally to integrate with our international market. A more detailed growth strategy will be outlined later in the report. Our pursuit of local responsiveness is best achieved through our firm’s commitment to meeting our clients demands. SCDP Advertising seeks to meet the specific marketing needs of our clients and allows us to tailor our services to the local market.

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12. Group 5 Page 12 Company Leadership/Structure Sterling, Cooper, Draper & Pryce Advertising (SCDP) consists of multiple levels of employees who function as one to offer high satisfaction with their customers and targeted population. Bertram Cooper founded the company with Roger Sterling Sr., since passed, and left the name to his son, the president and CEO Roger Sterling. Sterling works with the creative director Donald “Don” Draper to put into place decisions and run office meetings. Since Draper has began working at SCDP, the innovation has grown tremendously which has caused an increase in clientele. Peggy Olson, once the assistant of Draper, became a copywriter who increased the writing skills and added a new perspective to SCDP’s marketing. Joan Holloway assists with the organization of the office and keeps the daily work flowing. With Holloway, managers of the offices are able to focus on all ideas and clientele’s needs. The Chief Financial Officer (CFO) Lane Pryce makes changes that are quite successful in saving SCDP costs. Some changes included cutting out frivolous expenses, time consuming and unnecessary expenses, and informing the managers of the company with the financials. The head of accounts, Pete Campbell, and head of media, Henry Crane, work together to bring in new clientele to partner with outside media to market clientele products and services. Behind the scenes is the executive strategic management team consisting of Anh Nguyen, Jovanny Perez, Jessica Peterson, Eugene Lankin, and Steven Lai. The executive team assist the company with adapting to external environmental changes. As marketing or advertising needs change, the executives are able to assist the company in moving in a new direction. The structure at SCDP is considered functional with a differentiation strategy. At SCDP, Cooper is at the top and leaves the decision making to Sterling and Draper. Once a decision is

13. Group 5 Page 13 created, it is then taken to either Bertram and/or other heads of operations to make the final decision. As shown in the functional chart, SCDP encourages ideas at the bottom of the company and allows them to be brought to attention in the meetings. Each employee is encouraged to offer new ideas to the design team to use in the marketing concepts for the clientele. In order to create differentiation, SCDP has to represent themselves as unique with new and unusual ideas and methods. A step to broaden ideas is to use people outside the normal marketing team, such as the assistants or even nonemployees. SCDP searches to see what is attracting the current population and makes it superior. SCDP currently has a few challenges with the functional structure with a differentiation strategy due to the lack of guidelines for the employees. Some employees at times may forget about their assigned work because they are working on other teams members work instead. Although, ideas and creativity are encouraged it must be monitored. SCDP is currently located in New York and plans to grow to Los Angeles, Shanghai, and Tokyo. Once SCDP has expanded the transnational international strategy will be implemented. SCDP will utilize the transnational strategy to pursue profitable growth in the international markets by using their information and experience to open another office in the above locations. The services will be altered in a way that will appeal to the market. The new offices will reach the home office to identify plans and the individual team will implement it.

14. Group 5 Page 14 Ethics/Culture Ethics We are not only concerned with being profitable, we care about the welfare and ethical treatment of our staff. Our human resource department is responsible for giving equal opportunities to all. Sterling, Cooper, Draper & Pryce Advertising (SCDP) provides appropriate training and code of ethics. Our strategy is sustainability. In addition to the concern about the “green environment”, our ethics also include social sustainability, focusing on human capital, worker’s rights, working conditions, moral training, etc. We are considering the personal values, family background, culture, education, etc. from our employees before we make any important decisions. To establish an ethical business environment, our organization adopted a code of conduct for our employees which outlines the behavioral standards addressing the guidelines on acceptable and unacceptable behaviors and consequences. The goal of SCDP is to increase customer loyalty, employee retention, and good public image. According to Dr. Collins, who was recently honored with an Innovation in Teaching Award for the course from the Middle Atlantic Association of Colleges and Business Administration, there are five stages of Corporate Strategy: defensive, compliant, managerial, strategic, and civil. Our company is practicing the fourth stage, “strategic”, and moving towards the highest stage, “civil.” In response to the author’s statement “They often find that responding to public needs gives them a competitive edge and enhances longterm success (Collins, n.d.)”,

15. Group 5 Page 15 SCDP offers free marketing services to a randomly selected small business to help them grow revenue. In return, SCDP gains long term clients and builds relationships with small businesses. Culture Sterling, Cooper, Draper & Pryce Advertising (SCDP) implements an adhocracy culture. This form of organizational structure is flexible and informal. Adhocracy is primarily characterized by an adaptive, creative and flexible integrative behavior. Some of the characteristics Sterling Cooper Draper Pryce possess is it’s highly organic structure and selective decentralization. What this translates to is that all members of an organization have the authority within their areas of specialization, and in coordination with other members, to make decisions and to take actions affecting the future of the organization. The ad agencies success can be directly related to this culture. The firm has personnel whose purpose is to keep the employees satisfied and help maintain productivity. This is one of the core advantages at SCDP. We promote this environment to help encourage the creative process and optimize their human resources. SCDP provides various perks in order to keep their most important asset, the people, happy and taken care of. They provide free, high quality, meals throughout the day to employees to keep them wellfed. SCDP offers health and dental plans free of charge, which come at a cost to the firm. Due to employee satisfaction and decreased turnover, these benefits far outweigh the expense. Another key factor promoting this unique culture is that SCDP practices an organic form of organization. SDCP has a flat structured entity with few layers of management because its level of complexity and centralization are low. This means that members at SCDP share in the

16. Group 5 Page 16 organizational decisionmaking process. This form of organizational structure helps facilitate a culture that encourages personnel of all levels to make an input on decisions. This helps them feel acknowledged and appreciated that their views are being considered when decisions are being made. An important aspect of the culture of SCDP is effectively dealing with the rapidly changing environment. This firm possesses the attributes that help address and manage unforeseen problems and issues. This is enabled through our informal communication system which allows for quick communication, a flat fluid structure that can adapt to changes at a relatively fast rate. Lastly, this communication system gives SDCP the ability to easily and continuously change individual activities in the organization. Our firm is very flexible and adaptive to any changes, enabled through the few layers of management and the decentralized approach to conducting the organization.

17. Group 5 Page 17 Internal Environmental Analysis Resources Sterling, Cooper, Draper & Pryce Advertising (SCDP) company’s tangible assets consist of our financial resources, physical resources, and technology resources. Funding is the most important element in starting a business. With a long, well known history in the advertising industry, our firm has the ability to borrow capital to expand our business or it can use the extra free cash flow within the corporation. In addition, our corporation has a stable and growing income from our long term contracts with giant clients. Another tangible resource is our physical office on Madison Avenue in New York City. The term “Madison Avenue” is metonymically used for advertising; therefore our office on that avenue have been well known since 1960s. Technology resources is our other tangible assets. Empowered by the latest technology, our teams can share their views, cull information, and transform creative ideas to the tremendous ads products. The foremost component of our company’s intangible resources is our human resources. The success of an organization is deeply built on the talent and strength of its employees. Our creative team is made up of the most innovative and inspired key members in the company. From our team members’ knowledge and skills, we have the ability to innovate, and be successful in the advertising industry. Another component of intangible resources which makes the success of our company are our own 50 years brand name and the positive reputation from our big clients, such as: Procter & Gamble, Warner Brothers, Chevrolet, and etc. Capabilities

18. Group 5 Page 18 Since innovation can help drive new revenues and open new pathways for our organization, innovation is very important to our business, especially in an advertising industry. With the benefits derived from our resources, such as: creative teams and advance technology, we have a capacity to innovate and invent new ideas. Aside from this, our organic culture establishes the environment for successful innovation. Our organization culture helps in developing and exchanging information and knowledge through the firm’s human capital. Another capability is the platform capability which simply means advertising everywhere strategy. Our firm is able to advertise by prints, radios, digital, mobile, and social media. Therefore, we can diverse our products, and get more customers from the advertising market. We have more than 50 years’ experience and reputation in print advertising, and now we are expanding our capability to reach the expert in digital and media advertising. Although we just have one office on Madison Avenue in New York City, we have a growing virtual customer service representatives who were trained to provide the best customer service. In short, we have abilities on innovation, platforms, and customer service. Core Competencies Throughout the years, innovation has been the heart of our business core competencies. SCDP has some of the best creative graphic designers who are constantly learning the future social trends and are able to cast and develop commercials and promote products. Our ambitious clients not only come to us every day asking for a new idea in commercial videos but also looking for a solution to their business. We do not define innovation as a few last minute ideas; however, our team tends to be involved in the entire process to bring to our clients a full solution in marketing. Ever since the advertising industry evolved due to technology and social media

19. Group 5 Page 19 development, our team constantly has to find new and better ways to survive in the harsh advertising competition. Innovation which is a core for us to survive also is a reason for us to grow up in digital advertising. External Environmental Analysis Demographic To obtain the ability to satisfy customers with different demographics is a challenge for Sterling, Cooper, Draper & Pryce Advertising (SCDP) because customers from different countries and class have different desires. Which is why it is important for our company to diversify the customers we serve. We tackle this issue by creating hundreds of advertising projects to address a particular demographic, regional influence or trend. Our experience and knowledge is in satisfying many different customers. One group could have dozens of variations of interests in different products that are popular in that region of the world and not others. SCDP is very keen at identifying what the market needs. Our target markets are specialized agencies in areas ranging from businesstobusiness communications to demographically targeted marketing focused on women. Economic At SCDP we are always vigilant about any economic shifts and changes, therefore our strategic team in conjunction with our finance team properly plans and adapts in order to avoid any potential crises. The crisis can cause economic turmoil, increased unemployment, a rise in furloughs, bankruptcies of many corporations and overall great financial distress in general. Being able to retain creative workers in our workforce that can come up with great ideas is a

20. Group 5 Page 20 huge concern during budget cuts. Without innovation and creativity, SCDP business strategy of differentiation will struggle because the lack of workforce due to layoffs will be an issue to keep the company profitable. In 2011 a similar advertising company called McCann had to cut 5 percent of its workforce which is about 500 workers in response to spending cuts and difficulties in finding business opportunities. Sociocultural Since SCDP is planning to be a major player in the global market and distributes services in many different countries, our company has to be socially aware of the different cultures in those countries. Colors have different meanings in different cultures. For example, black and white colors are used for mourning the dead and in green is Egypt's national color. These colors should not be used as packaging or advertising in these respective countries. Another example is how Americans find tanned skin pleasing to the eye, but it is the opposite in Asia. Target has made a mistake in advertising a clothing line for plus sized women. The problem was not making clothing to satisfy bigger women, but naming the color grey to mantine grey. Customers found correlating manatine and oversize women offensive. Because in these different countries there are various different customs and traditions local citizens abide to. So it is very critical for SCDP to be well versed in these different cultures in order to know the right approach to market to these customers. Global As there is a steady increase in the global economy, the economy becomes more reliant on technological advances. This in turn creates an opportunity for SCDP to further promote its

21. Group 5 Page 21 position in the global market. We have our marketing, financing department and logistics regarding research and development located in New York City. We plan to expand our operations to China and Japan also. Currently China has one the biggest growing economy in the world with a growing middle class. Demands for products such as bags, electronics, and accessories that were once only affordable for the rich are not on the rise by a growing upper and middle class in China as foreign job opportunities continue to to be grow. SCDP expects to employ over 300 employees and distribute in 3 countries. Since the beginning of SCDP, it has established itself as a company that is known for its quality services and brand name. By expanding its globally presence, SCDP can be a leader in advertising around the globe. With this creative and innovative mindset that is coupled with reasonable prices, SCDP has impacted its sales in a profitable way. Technological Technology is an external factor SCDP will have to address. In a statistic report from Statista, from the year 2015 to 2016, advertising in cinema, digital, radio, and television continue to grow in demand. However, magazines and Newspapers continue to decline. This trend shows consumers prefer to see content in digital format and information in paper is preferred less. SCDP has always lead the way in terms of producing products that are enhanced by technology and software from other companies in order to help create the most advanced experience for the consumers. Also we have offered one of the best services of advertising. This company doesn’t follow advertising procedures, it goes above and beyond that. It creates new advertising strategies. SCDP strives to continually deliver landscape changing advertisements, while keeping a focus on even the subtlest of design details that makes its services and its brand cherished by

22. Group 5 Page 22 millions of customers worldwide. Not only does SCDP abide to its standard of quality it is also a “driving innovation in advertising, implementing feedback through communications on the internet, on movie premiers, sports entertainment on television, and radio stations during busy traffic hours”. Political/Legal Legal issues depending on which country controlled by their government can pose a difficult obstacle for SCDP. In the American U.S. Government, advertising industry must operate within strict federal regulations. The Federal Trade Commision monitors advertisers to ensure they act ethically all times, pay special attention when advertising to children, advertising potential harmful products, and using methods that can alter the audience’s thoughts. These advertisements must be truthful and not deceptive or unfair. These requirements are only a few examples SCDP will have to address. Operating overseas such as China with heavy censorship is another challenge if advertising companies wish to expand their business.

23. Group 5 Page 23 Market Analysis The market analysis we conducted indicates that advertising is incredibly important to business therefore there will always be the need for agencies that can provide these kinds of services. Making advertisements requires the creative process. Corporations allocate a lot of resources in order to market their products to potential customers. Companies such as Microsoft, CocaCola, Heineken and various others spend billions of dollars on marketing and advertising in order to capture the attention of consumers and have in turn have become some of the largest brand names not only in the domestic market but also on the global spectrum. Companies cannot survive without the consumerism. The primary objective of advertising is to get the word out to the market that you have something they potentially might want. The key to SCDP’s approach to advertising doesn’t just make the consumer want the product, we make them need it. Don Draper, the Creative Director of the firm is quoted saying, “Advertising is based on one thing, happiness. And you know what happiness is? Happiness is the smell of a new car. Its freedom from fear. It’s a billboard on the side of the road that screams reassurance that whatever you are doing is okay. You are okay.” This quote indicates that the SCDP exhibits the understanding of the consumer market and what drives it. This company possess the intuitive understanding of the consumer’s mind. This is why this ad agency is so wildly successful because we understand that people want to be told what to do so badly that they’ll listen to anyone. Billboards, commercials, print ads, and various forms of media help promote the intended products. Advertising helps to raise your demographics’ awareness of issues with which they may be unfamiliar as well as educate them on the related benefits of issues of your service and product. This is another

24. Group 5 Page 24 indicator of why there is so much revenue to be made by advertising agencies because as long as consumerism and businesses will exist, there will always be the need for these products to be advertised and promoted to the consumers of this market. Demand for advertising will increase with the number of new products. Firms want to inform consumers about the availability and characteristics of a new good to establish a market niche. With some many companies coming out with new products, the need for these products to be marketed to the consumers keeps growing. Not only do these companies need a way for these to be marketed, they need to be advertised in such a manner that the consumer will choose their product or service over the competitor’s. We also conducted research to support our claims regarding the increase of the need for advertising and the need for advertising agencies that can provided these types of services. There are many positive signs that indicate that advertising is on the rise across the world. In general ad spending is increasing at a fast pace. Worldwide spending has increased by 5.8% in 2016 and has reached an alltime high. Recently the internet has passed newspapers as the world’s second largest ad medium. This source of advertising uses roughly 1 out of every 5 dollars allocated for advertising, while TV still remains the frontrunner source of advertising because it is responsible for 40% of the advertising generated by companies. Ad spending grows and will keep growing in the future. Currently China is the third fastest growing advertising market. The two largest being the U.S and Japan respectively. It is one of the fastest growing markets in the world. With the introduction of newer technology, the consumerism of electronics and technology is the fastest growing ad category among the Global 100 with a 9.6% increase in future years. With some many products needing to be advertised there will be stiff competition between ad agencies over

25. Group 5 Page 25 the securing of lucrative contracts with brand names such as Sony, Toyota, Apple, Old Spice and such. The product and service that SCDP is offering isn’t entirely new. The concept of advertising has been around for since ancient times when Egyptians used papyrus to make sales messages and wall posters. So in the modern world we have multiple very successful advertising agencies such as McCann Erickson who have prestigious clients such as Nestle, GM, CocaCola, General Mills. This causes very fierce competition between agencies to acquire and retain these globally recognized brands. We have come to the conclusion that because there is such a wealth of new products waiting to be advertised and a market to take advantage of that the advertising industry can be very profitable.

26. Group 5 Page 26 Competitive Advantage Core Competencies/ Discovering Core Competencies Sterling, Cooper, Draper, & Pryce Advertising (SCDP) produces the most innovating marketing services in the industry. Our company has utilized its resources to develop an innovative process that allows for creative thinking to produce results. Our firm uses the organizational adhocracy culture to allow the team to think freely with reduced stress. At SCDP we do not pressure our team to produce results because we can count on them delivering, we also have “free thought rooms” in which we provide an ambient room to process ideas freely. This innovative way of managing our employees produces not only results, but offers clients an added value. Our adhocracy culture can be attributed to our sustained market share and revenue stream. Valuable: Valuable capabilities allows for firms to exploit opportunities in their external environment. At SCDP our internal organizational structure that consists of an adhocracy culture gives our staff the tools to produce results. Our adhocracy culture allows us to exploit the market share and reduce competition risks because we gain loyalty among customers due to our differentiated services. Rare: Rare capabilities are essential because it means that there is not very many, if any, competitors with the same capabilities. Many marketing firms in the industry do not use an adhocracy culture and rather utilize an easier to manage hierarchical culture. SCDP has learned that our company is unique because it is difficult to manage and perfect. Being a rarity in the industry our internal organizational structure allows us to succeed in the market. Costly to Imitate: Capabilities that are costly to imitate act as a barrier for other companies. Completely restructuring a company’s organizational structure can be quite costly. SCDP has

27. Group 5 Page 27 utilized this organizational structure since the founding years. For other firms to attempt to imitate our organizational structure it would require a high capital investment to conduct the proper research and restructuring of the firm. Non Substitutable: Capabilities that have no direct substitutes, or cannot be imitated easily, are essential for sustainable competitive advantage. In the case of a new organizational structure this can go both ways. Although the Adhocracy structure embraced by SCDP is a shift from traditional firms it may still have be substituted by a similar organizational structure. Adhocracy in some cases may be considered non substitutable and in some cases may not. Sustainable Competitive Advantage: Adhocracy culture Our sustainable competitive advantage is our internal organizational structure that is used to to manage our employees. The adhocracy culture we embrace allows our firm to provide the quality of our service our clients seek. Our innovative and creative services are ranked as the highest value to our customers. Our sustainable competitive advantage is reinforced by our product differentiation strategy and innovation core competency. The ability of Sterling, Cooper, Draper, & Pryce Advertising (SCDP) to innovate a new product and new solution in marketing to bring the best value to our clients. Innovation helps create the value for both our company and customers in the competition market. In the article, “Can Marketing and Media Be Leaders Innovation,” the author claims although advertising and marketing is a field which requires new ideas and innovation, finding the truly innovative idea can be a challenge. SCDP solves this issue by using an Adhocracy culture. Our sustainable competitive advantage is rare, and not easy to imitate. With more than 50 years of experience in advertising industry, we have been building the best workplace to innovate, and it is costly to imitate. Our internal organizational structure allows

28. Group 5 Page 28 to be more resistant to competition and the external environment. Moreover, there is no practical substitute for this sustainable advantage. Growth Strategy The growth strategy for our company is to expand business operations beyond New York. We would like to expand to locations Los Angeles, USA, Shanghai, China, and Tokyo, Japan because these locations have the fastest growing advertising market. Expansion to these locations will broaden our customer base with different cultural beliefs and needs. This diversification is expected to create value and allows our business to increase revenues or reduce costs while implementing our businesslevel strategies. Expanding our business internationally gives us the ability to block competitors that are interested in operating within our industry. This is also known as increasing market power of our business. Diversification also marginalizes the risks our company will face by putting our investments through different locations. If one of our offices failed to reach its goals, another office that is doing well in another country can offset the loss and our company from defaulting on our debt to banks and investors. Considering our corporate strategy is following a differentiation strategy our company will be running a decentralized structure having offices from different locations are expected be more autonomous and self sustainable by management governed to compete to run efficiently. These offices will follow our corporate level strategy and retain a related linked relationship. Each unit will share some limited resources, but our main business in New York City will produce the largest share of revenue. These offices will operate with transnational standards by focusing on satisfying the needs of management and the local community each office built on the location of the offices in Los Angeles, Shanghai and Tokyo. Each office is expected to form strong business relationships

29. Group 5 Page 29 with its customers and 3rd party partners to keep our services excellent without sacrificing low costs. Financial Analysis Sterling, Cooper, Draper, & Pryce Advertising (SCDP) will gain tremendous financial security by engaging in the expansion of their market in prominent regions such as Los Angeles, Tokyo and Shanghai through the method of capital investment. SCDP will establish itself in this emerging market by establishing headquarters that offer their advertising services and core capabilities. SCDP should remain conscious of the ever changing external and industrial environment when making moves of this great proportion. With the introduction of new products and goods that need to be advertised on a global scale, the need for market is always growing. We conducted research that provided us with concrete facts that suggest that global spending on media is projected to rise at a compound annual rate of 5.1 percent during the next five years. By 2019 that amount should be roughly $2.1 trillion. Digital advertising, video games and broadband will continue to be the fastestgrowing segments over the next five years. We estimate that we will increase by 12.7%, 8.1 % and 7.8% respectively. Marketers are expected to spend $540 billion dollars globally on advertising this upcoming year. Digital ads will lead the way for global media growth in the next four years, accounting for 33% of total advertising revenue, nearly catching TV in the process. TV advertising will grow to $214.7 billion in 2018. During the same period, Internet advertising will grow from $133 billion to $194.5 billion. This following research is indicative of why SCDP should go through with this growth strategy. By

30. Group 5 Page 30 entering the global market, they will see increased sales, revenue, and overall greater profit margins. We believe that in addition, SCDP will drastically improve and increase their customer base globally which in turn leads to sustainable profitability and future economic growth. SCDP has experienced an increase in financial profitability over a sustained period of time. After performing various preliminary analytical testing and financial analysis we discovered a few indicators that pointed towards the notion that SCDP is maintaining a successful organization. All of the data we found to construct our profit and loss predictions can be found in the P&L statements in the following sections. In 2015, the total revenue for SCDP was $5.3 billion. Currently due to various expenses during the year, SDCP has accumulated nearly $1.77 billion in gross income. If SCDP goes through with their growth strategy of market expansion, there will be an increase in revenue. With this growth strategy in mind, we forecast that in 2016, revenue will increase by 22 percent to $6.44 billion. The basic earnings per share for 2015 were $8.72. We forecast that in 2016 earnings per share will grow by 2% to $8.91. In 2015, SCDP generated a total amount of cash flows from operating activities equating $1.33 billion from operating. In 2016, we expect the cash flow to from operating activities to grow by 27% to $1.71 billion. In 2015 we acquired negative $4.74 billion total cash flows from investing activities. We project that in 2016, their next operating cash flow will increase by 38% to negative 3.45 billion. Lastly the advertising agency was able to generate $3.5 billion in total cash flows from financial activities in 2015. Given our equation we believe that the cash flow from net financing will decrease by 53% to $1.86 billion in 2016. SCDP will perpetuate financial success through a relaxed constrained diversification strategy coupled with the transnational international strategy in Los Angeles, Shanghai and

31. Group 5 Page 31 Tokyo by playing off their existing organizational strengths. We project that if all variables remain constant and our growth rate remains at 20 percent per year, over the next five years our revenue will increase to $13.38 billion. Sales growth in China and Japan is a vital part of increasing the business of SCDP. If Chinese economic, political or business conditions deteriorate, or if one or more of the risks described above materializes in China, overall business and results of operations will be adversely affected. Implementation Sterling, Cooper, Draper, & Pryce Advertising (SCDP will pursue a global and domestic growth strategy by the end of 2017. In pursuing this strategy our company is expected to not only gain a larger global market share but also increase revenue streams substantially. As stated in our financial analysis, the need for marketing services has grown exponentially with many firms allocating billions of dollars to their marketing needs. This opportunity will be captured in our expansion to the Los Angeles area in 2017 followed by our global expansion to Tokyo, Japan and Shanghai, China in 2020. SCDP already has established connections with clients in these areas but by setting up a physical location we hope to capture a strong local response while maintain our mission and values. To fulfill the expansion there will be a domestic acquisition as of already established marketing agencies in Los Angeles and a joint venture in the global

32. Group 5 Page 32 market. We aim to acquire smaller firms that specialize in online marketing and work on a B2B level and work with established marketing firms as a joint venture for our international strategy. SCDP will engage in an acquisition strategy to fulfil our domestic growth strategy. In doing so we will gain quick access to these new markets in Los Angeles. Acquiring new firms will be a high capital expenditure but because SCDP already has large cash reserves from our revenue growth the acquisitions will be attainable financially. Our acquisition will take place in Los Angeles by the end of the year 2017. In doing so we hope to capture the growing need for television advertising which is expected to grow to $217 billion by the end of 2018. Los Angeles is the center and heart of television media and so the need for marketing will be exponential here. Having acquired a firm in the Los Angeles area will also open up opportunities with the local media market. In essence this will be a horizontal acquisition strategy as we will gain new resources from the firm which will help us expand our market share. SCDP will share some resources with these new subsidiaries, most of which will be in the form of intangible assets, that is we will transfer our innovation strategies as well as our organizational structure strategies. Our international growth will begin with a series of joint ventures in Tokyo, Japan and Shanghai, China. Because cross border acquisitions in these regions would be extremely complex and costly, SCDP has opted for a strategic alliance in the form of a joint venture. The two ventures that will take place will be between Dentsu Inc. in Japan and Leo Burnett Shanghai Advertising Co.. We aim to complete and implement these joint ventures by the end of the year 2020. Dentsu is currently the third largest global marketing agency and holds a large market control of media outlets in Japan. Dentsu has in recent years sought to use westernized marketing strategies to pursue in Japan. SCDP will begin negotiations with Dentsu following the Los

33. Group 5 Page 33 Angeles acquisition in 2018. In doing so our company will be able to offer Dentsu the marketing solutions in needs in its home country by sharing our resources. Our company specializes in the innovation and creativity that Dentsu needs so a strategic alliance is highly attainable. If implemented by 2020 SCDP will have gained access to Japan's marketing industry and will add revenue streams close to $1billion by the end of 2020. The second global market we will enter will be in Shanghai, China. Sterling Cooper Draper Pryce Advertising will aim to simultaneous attain these two joint ventures and implement them in the same time frame, from 20182020. The reason for this is we hope to capture as much market share as possible from this emerging digital marketing industry which in turn will generate large revenue streams for our company. Concocting an alliance with Leo Burnett Shanghai is expected to be much easier and smoother. Leo Burnett Shanghai currently has a center in Boston, USA, which has in other times has outsourced work to our firm for small projects. We have an established relationship with Leo Burnett Shanghai which will make the alliance plausible by 2020. When established Leo Burnett Shanghai will open up the market in China for our firm. Currently Shanghai China has a growing marketing industry. On average the marketing industry revenue has grown by 20% reaching over $1 billion in 2015. If projections are correct the industry will be worth over $2 billion by the end of 2020. Having a set, a joint venture will allow SCDP to tap into the revenue of this market. A strategic plan has been set and is expected to be implemented by the end of 2017, beginning with a domestic acquisition strategy followed by an international joint venture. Both our domestic and global strategy will be completed by 2020. The domestic strategy will allow us to gain resources for our dominant business in New York, which in turn will serve as bargaining chips for our international ventures. We expect the joint ventures to go smoothly and have access

34. Group 5 Page 34 to the Japan and China market by the end of 2020. There will be a limited amount of resources shared in this growth strategy primarily our internal organizational strategy and innovation techniques will be shared. In doing so we hope to add revenue streams to our business of plus $2 billion by the end of 2020. This growth strategy will also give our firm long term access to a global market which will translate into possible cross border acquisitions in the future.

35. Group 5 Page 35 Conclusion From the beginning, Sterling, Cooper, Draper & Pryce Advertising (SCDP) declared itself dedicated to creating a network built on collaboration and shared bestinclass resources designed to help all of its clients maximize their growth potential. We went from being this start up advertising agency in the 20’s that was hardly on its feet to being one of the most prestigious advertising companies in the world. Previously our only major client was Lucky Strikes whereas nowadays we have contracts with wellknown brands such as Toyota, Ferrari, Intel, Hennessey and Alienware. Along the way, it was Sterling Cooper Draper Pryce in early 1960s that introduced coordinated marketing communications, incorporating such areas as public relations and sales promotion. We have developed strategically aliened partnerships with media giants such as TimeWarner, GE, Disney, CBS, NewCorp and GE in order to provide prime time broadcasting and advertising for our premier clients and their goods and services. These partnerships are incredibly key because 90 percent of the media is owned by these six companies. So we are able to provide for our very respected clientele and offer them the best in the business in terms of marketing and advertising. We believe that with our adhocracy business culture, our innovative approach to advertising, our outstanding awardwinning personnel and our creative director, Don Draper that we are in fact one of the most revolutionizing advertising agencies in the market today. We believe we can achieve a competitive advantage through the use of focused differentiation, dominant business diversification and a transnational approach of conducting our business. This company possess the intuitive understanding of the consumer’s mind. This is why our ad agency is so wildly successful because we understand that people want to be told what to

36. Group 5 Page 36 do so badly that they will listen to anyone. The market for advertising has never been bigger. Ad spending grows and will keep growing in the future. Currently China is the third fastest growing advertising market. The two largest being the U.S and Japan respectively. SCDP produces the most innovating marketing services in the industry. Our company has utilized its resources to develop an innovative process that allows for creative thinking to produce results. Our firm uses the organizational adhocracy culture to allow the team to think freely with reduced stress. Our sustainable competitive advantage is our internal organizational structure that is used to manage our employees. The growth strategy for our company is to expand business operations beyond New York. We would like to expand to locations Los Angeles, USA, Shanghai, China, and Tokyo, Japan because these locations have the fastest growing advertising market. Expansion to these locations will broaden our customer base with different cultural beliefs and needs. SCDP will perpetuate financial success through a related constrained diversification strategy coupled with the transnational international strategy in Los Angeles, Shanghai and Tokyo by employing our organizational strengths. We project that if all variables remain constant and our growth rate remains at 20 percent per year, over the next five years our revenue will increase to $13.38 billion. Sterling Cooper Draper Pryce delivers marketing solutions that transform brands and grow businesses. The company is comprised of a collaborative roster of the bestinclass that emphasize creativity, innovation, and performance.We believe that we are the company you should invest in. We are the future in advertising. And you may ask what makes us different from other advertising agencies? We would like to conclude our business plan with one parting quote from our creative director, Don Draper when comparing us to our competition

37. Group 5 Page 37 he said, “ We are the product. We feeling something. That’s what sells. Not them. Not sex. They can’t do what we do, and they hate us for it.”

38. Group 5 Page 38 References Aditham, K. (2011, Aug 4th). Adweek.com. Retrieved May 2nd, 2016, from AgencySpy: http://www.adweek.com/agencyspy/mccannnylayoffs/22594 Adweek.com. (2011, August 5th). Retrieved Apr 30th, 2016, from Adweek: http://www.adweek.com/news/advertisingbranding/mccannericksonslayoffsaffect2530staff ers133932 AsheEdmunda, S. (n.d.). smallbusiness.chron.com. Retrieved May 14th, 2016, from chron: http://smallbusiness.chron.com/examplesadvertisingstrategies10853.html Collins, K. (n.d.). catalog.flatworldknowlege.com. Retrieved from http://catalog.flatworldknowledge.com/bookhub/7?e=collinsch02_s07 Divinsky, P. (2008, July 8). CNN.Com. Retrieved from CNN World: http://www.cnn.com/2008/BUSINESS/07/08/jwt.answer/index.html Hitt, Michael A., R. Duane Ireland, and Robert E. Hoskisson. Strategic Management: Competitiveness & Globalization. Print. retrieved at 5/14/16 McNamara, C. (n.d.). managementhelp.org. Retrieved May 1, 2016, from Free Management Library: http://managementhelp.org/businessethics/index.htm Statista.com. (n.d.). Retrieved May 10th, 2016, from Statista: http://www.statista.com/statistics/272304/growthofglobaladvertisingrevenuesbymedium Taylor, N. F. (2015, June 19th). Businessnewsdaily.com. Retrieved May 14th, 2016, from Business News Daily: http://www.businessnewsdaily.com/4679corporatesocialresponsibility.html

39. Group 5 Page 39 Appendices Functional Structure for implementing a differentiation strategy Sterling, Cooper, Draper & Pryce Advertising organizational chart S.W.O.T Table

40. Group 5 Page 40 Functional Structure for implementing a differentiation strategy Sterling, Cooper, Draper & Pryce Advertising organizational chart

41. Group 5 Page 41 S.W.O.T Table S T R E N T G H S ● Expertise and experience in the advertising industry ● Strong reputation ● Customer loyalty ● Financial ability ● Free cash flow ● The best creative team W E A K N E S S E S ● Only one office in New York ● Huge amount of R&D O P P ● Expansion of the new market ● Innovate the new product

42. Group 5 Page 42 O R T U N I T I E S ● International expansion T H R E A T S ● Increased competition ● New cultures of new geographic markets

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