Structural and strategic change across the print, media and graphics industry

Structural and strategic change across the print,

media and graphics industry

Research findings and observations on change and

capitalising on the opportunities

Marcus CliffordBPIF McInnes Corporate

Outline of Research• Commissioned to understand some of the underlying

factors that are forcing change on business owners• To open up awareness of the tools available to

capitalise on change and the many sources of support• A National survey• Response rate was highest of any BPIF on-line survey• Wide range of businesses representing different

markets, responded• Input from companies with turnover range covering,

small,medium to large• Provides valid and representative information on our

sector

Setting the Scene

It’s a market of opportunity and big challenges- But what a combination

of challenges!• Our Industry is embarking on greater fundamental change- A combination

of structural and strategic• The combination of pressures and specific nature of some of these, create

a necessity to act sooner and work differently-Encouraging signs and tangible actions taking place

• The solution requires a more dynamic and blended combination of initiatives-Not so easy

• The gap between good businesses and poor businesses is getting wider• Fundamental business principals and practices are still important.

Sophistication does not mean ignore the basics

• Hopefully the Research will focus more attention on positive actions and improving the planning process

Setting the Scene

Potential Entrants

Buyers

Substitutes

Suppliers

Industry competitors

Who has strongest strategy andCapability to implement

Rivalry Among Existing Firms Bargaining Power of Buyers-ongoing

Substitute Products or services

Bargaining Power of Suppliers

Threat of New entrants entering grabbing your markets

Understanding this, alongside your customers strategy and developing a plan to combat itis fundamental to creating a formula that wins more than loses

Setting the Scene

Determinants of profitability for the IndustryCompetitive Forces on the sectorYou Live it daily!

Quality Up! Costs Down! Differentiate-Boom!

• Development of any strategy implies two things• You are determined to begin to control events rather than the

other way around• You review your options against the marketplace and recognise

planned actions are more likely to lead to success

• Those with a strong sense of strategy and blended combination of solutions will develop a more sustainable future-Leave nothing to chance

• Use the Industry support organisations to give you the tools and adopt best practices

Setting the Scene

Strategy rules in a marketplace of great change

• M & A activity is only one of many solutions• Developing and creating competitive advantage is

key issues for our sector :-– Core Competence– Time reduction– Strategic relationship management – With customers,Competitors, New

Partners– Continuous Improvement

• Evolution of market and customer requirements change nature of boundaries and ways things are

done

Setting the Scene

Typical Responses to Competitive forces

• Downsizing or rightsizing• Benchmarking,process re-engineering, continuous improvement• Increase in outsourcing• Time reduction/improvement actions• Testing of Alliances and Joint ventures• Rise of M & A activity• Expansion into new and different markets

• Lot of initiatives underway from respondents and they will capitalise on change-those that aren't, Won’t survive! -Combination of pressures is too brutal

Setting the Scene

Discipline OPERATIONAL EXCELLENCE

PRODUCT LEADERSHIP

CUSTOMER INTIMACY

VALUE Best total cost Best product Best solution

THEME Low cost relative to competitors

Unique product or brand

Serving a target particularly well

OBJECTIVES High market share, favorable (raw material) costs

Exclusive products and brands

Customised products or services, share of customers wallet

MINDSET One size fits all Out-of-the -box Have it your way

ORGANISATION Hierarchical,Centralised

Ad-hoc and organic EntrepreneurialClient teams

FOCUS ON Supply chain and cost reduction

Innovation and market introduction

Client acquisition and development

Customers will always use suppliers who offerbest competitive advantage package

Setting the Scene

Review of Research Findings

• Interesting perspective on industry, sector and own company viewpoint• Maybe reflects difficulty in truly understanding the mix and forces of change• Business owners are optimistic about their own future or gloomy-polarisation• Its not all doom and gloom!-lets build on this• What is behind this polarisation of views ?

‘Significant’ and ‘Critical’ sector trading issues 2006 to 2007

SIGNIFICANT PROBLEMS CRITICAL PROBLEMS

Significant problems: These are companies with either a court action and/or average, poor, very poor, insolvent or out of date accounts.Critical problems: This group relates to winding-up petitions including applications, adjournments and dismissals. 

Source: Red Flag Alert Statistics for the Print & Packaging sectors in the UK for January - August 2007, Begbies Traynor - Corporate Rescue & Recovery 

Business models are under pressure

• Budgeting and the forecasting of future revenues is increasingly difficult• Capacity and headroom capacity is still increasing • No surprises in seeking to act as consolidator-but it’s not an easy strategy to fulfil• Worrying for those who cannot consistently utilise assets to cover costs

Cautious or Brave it’s a never ending game

•Competitive pressures are widening the gap between those that will and those that won’t or can’t and the have’s and have not’s-many being left behind•Highlights a cautious view or spend continues at a pace ?•Complimentary digital and litho strategies have accelerated•Ongoing issue is building ROCE and OEE ratio

• Ongoing threats that are not going to go away-only getting more pervasive• Forces shaping Incremental and Fundamental change are meeting • Change taking place within and without-creating more management and business tension• Each issue requires a defined action plan- and an overall multi tasking strategy

• Each sector has a specific and common range of competitive pressures• Whilst the list is not new the combination and focus is more pervasive• Sensitivity of business models to cope with combination of pressures• The dynamics are creating great opportunity for those with the resources

• Businesses are acting now and looking more seriously at merger, acquisition or disposal strategies• 30 % of respondents actively pursuing • 9% developing a plan of action• 31% considering• 30% not considering• Consolidation should strengthen an Industry-If it is undertaken properly

Drivers of Consolidation and M & A activity• 14% Customer driven• 21% Competitive pressure• 43% pressure on profit margins• 18% age profile of shareholders• 23% performance of the sector• 78% due to business planning

process and identifying M & A• 64 of the total respondents

skipped the question ?

Quality Up, Costs Down, Differentiation, Boom!

• Complimentary to current business 74%• Same as current business 45%• Diversification to current business 34%

A winning combination

Summary• Depth and combination of pressures forcing great

structural and strategic change• A complex matrix of market factors and forces• Strong sense of strategy will deliver a way through• Companies are reacting and meeting the challenges• Sadly a great many are not• It is a market of opportunity• It is never too late to begin the planning process and

review your options to create a better future• There is plenty of support available, you are not

alone