PECULIAR CHALLENGES TO CORPORATE CONSOLIDATION AND GOVERNANCE IN CONTEMPORARY TIMES: INTEGRATED MARKETING COMMUNICATION SOLUTIONS

The focus in the general business world today is on empire building and change has created the right conditions for new life. The really big companies have the most money and the most to lose from fleet-footed competitors. Recall that CBN gave Nigeria’s 89 commercial banks a December 2005 deadline within which to raise their capital base to N25 billion. Before then the capital base was N2 billion.

Similarly, the minimum capital requirement set by NAICOM for insurance companies was N2 billion or Life, N3 billion for General and N10 billion for Reinsurance.

The immediate effect of the directives was a situation where many “marriages of convenience” took place courtesy of mergers and acquisitions.

Consolidation poses challenges arising from integration of processes, IT and cultures; and most importantly the emergence of mega companies in the post-consolidation era is bound to task the skills and competencies of Boards and Managements in improving shareholder values and balance some against stakeholder interests in a competitive environment.

* Mergers and acquisitions bring changes that affect the careers of thousands of people – positively and negatively – at all levels

Post-Consolidation Caution

• Empires work on volume and systems and rules that hamper their ability to be creative

• Mega companies gain economies of scale and can dominate for a time, but inevitably they become less innovative and attract weaker talent

• They begin to refuse to take the risks that smaller companies are willing to take, e.g. Microsoft’s inability to innovate despite $7 billion R&D budget in 2004. The company’s resources were dedicated to defending its existing market position, leaving the likes of Napster and Apple to decode digital music.

• Consolidation is not synonymous with immunity from failure if companies operate in a poor corporate governance environment.

• This is the set of processes, customs, policies, laws and institutions affecting the way in which an organisation is directed, administered or controlled

• It is concerned with effective leadership of organisations to ensure that they deliver on their promise and that they do so in a sustainable manner

• It also includes the relationships among the many players involved (the stakeholders) and the goals for which the organisation is governed.

Principal Players in Corporate Governance

• Shareholders
• Management
• Board of Directors
• Employees
• Suppliers
• Customers
• Banks and other lenders
• Regulators
• The environment
• The community at large

Why the Pre-occupation with Corporate Governance?

• The East Asian Financial crisis of 1997 saw the economies of Thailand, Indonesia, South Korea, Malaysia and the Philippines severely affected by the exit of foreign capital due to the collapse of property assets

• US Corporate crises which saw the collapse of two big corporations: Enron and WorldCom, and the ensuing scandals and collapses in other organisations such as Authur Andersen, Global Crossing, Tyco and Parmalat

• The clear lesson these cases thought the corporate world is that no company can be too big to fail.

Principles of Corporate Governance

• Honesty
• Trust and integrity
• Openness
• Performance orientation
• Responsibility and accountability
• National respect
• Commitment to the organisation

The Importance of good Corporate Governance

• Corporate governance in Nigeria is at a rudimentary stage and only 40% of companies quoted on the Nigerian Stock Exchange have recognised codes of corporate governance in place

• Poor corporate governance was one of the major factors in virtually all known instances of distress experienced by financial institutions

• James Wolfehnson, former President of the World Bank says that in future, the governance of corporation will be as the government of nations

• Arthur Levitt, former chairman, US SEC says that if a country does not have a reputation for strong corporate governance practices, capital will flow elsewhere.

Challenges facing corporate consolidation and Governance

• Forced consummated mergers and the limited time available, e.g. in Nigeria’s banking industry, will for some time, affect their progress

• Technical incompetence of Board and Management

• Boardroom Squabbles among directors

• Squabbles among staff and management

• Inadequate risk management system

• Malpractices and sharp practices may resurface

• Insider-abuses

Balance of Power between the members and the Board

• Abuse of corporate power is made possible by the weakness or strength of the members in General Meeting and the Board of Directors through whom the company’s powers are exercised

• Though the companies and Allied Matters Act 1990 contains provisions aimed at balancing the power equation between the two organs, the fortune of the company is determined by their relative strength or weakness

• The members are supposed to exercise control and direct the affairs of the company

• In reality, the members hardly exercise their powers as they should because of reasons such as the cost of attending meetings, ignorance of the powers available to them, lack of understanding of reports given at such meetings and the lack of unwillingness of the majority shareholders to press the Board of Directors on issues, etc.

• The General meeting therefore ends up being an approval or confirmatory body of the Board.

Shareholder Limitations

The key avenue prescribed by the Companies and Allied Matters Act for enforcing the shareholders’ rights is still the court. But Nigerian courts are slow and expensive.

They are also not effective in resolving commercial disputes. As a result, shareholders hesitate to use the courts.

Little wonder therefore that the directors continue to govern with impunity.

Possible Reasons for delays in Trials

• Corruption

• Inadequate Judicial Personnel

• Weak Rules of Procedure

• Poor Facilities

• Undue Regard for Technicalities

• Poor Case Flow Management

So what has IMC got to do with the Challenges from corporate consolidation and governance?

• Integrated marketing communication (IMC) is a critical component of modern marketing

• It is a critical aspect of a company’s overall marketing mission and a major determinant of its success

• Marketing in contemporary times is communication and communication is marketing

• The two are inseparable

The primary forms of marketing communications

Include:
• Advertisements

• Salespeople

• Store Signs

• Point-of-purchase displays

• Product Packages

• Direct-mail literature

• Free samples

• Coupons

• Publicity releases, etc.

• All the above collectively translate to the Promotion component of the marketing mix

• One term that suffices as a summary means for describing all forms of marketing objectives is “branding.”

Branding

Brands in the field of marketing, originated in the 19th century with the advent of packaged goods.
• A brand is a mixture of attributes, tangible and intangible, symbolised in a trademark, which if well managed, creates value and influence

• Brands offer customers a means to choose and enable recognition within cluttered markets

• A brand is what results from marketing consistency; the source of that consistency is usually referred to as the brand’s values because it is presumed that the only way a brand can be truly consistent is by being true to itself, its beliefs and creeds, at all times.

• Branding is the foundation of marketing and is inseparable from business strategy

• Branding is more than putting a label on a fancy product

The IPO Fever in Nigeria

Remember the banking consolidation era and the attended IPO fever which was unprecedented? I learnt from a friend who serviced one of the banks that never before in the history of banking had the sector invested massively in branding, advertising, image management and media buying. According to him, the audience invariably found it difficult to make a discerning purchase decision.

I believe that uniqueness and distinction should have made a clear path of communication starting from the banks’ headquarters all the way to the shareholders via the stock market.

• A corporate brand with millions of naira in advertising and promotional support is merely a useless brand unless it has a unique position, and a clear name identity, strong enough to place the company aside from all the other copy cats, etc.

• There are thousands of IPO’s which simply fizzle away as soon as the media blitz is over; this measured excitement only lasts a few pre-numbered days in spite of the huge sums of naira expended in their execution

• Can you match the mega bank status, e.g. with the quality of communication “unleashed” on the local as well as the international markets?

• Do stakeholders painstakingly communicate the right messages effectively, characterised by credible and visible promises?

• Post-consolidation demands more communication, the need to be seen and heard and the inevitability of aligning activities, culture, philosophy, vision and mission.

Functionality of IMC

• Deployment of communication elements creates emotional desires for brands and convinces the target audience to make a favourable purchase decision

• IMC in Nigeria must evolve with the environment such that the image and public perception of an organisation is enhanced

• A strong positive image of the corporate brand rubs off on its products/services

• Consolidation means projecting a new corporate identity and image from scratch to the public, e.g. logo, colour, corporate manual, signage, letterhead, etc.

• Logos should be world class

• IMC engenders professionalism, consistency, continuity, etc. for consolidated companies

• Branding should create an environment that attracts foreign equity participation with the attendant benefits in terms of transfer of know-how and best practice

• One of the greatest opportunities a re-capitalised industry offers is that of embarking on innovation. IMC helps package and promote products and services that clients truly want.

• The mega companies that emerge from consolidation should pool resources for serious marketing communication campaigns to boost overall awareness on their industries and help engender their growth

• IMC companies should also come up with great proposals on behalf of marketers on corporate social responsibility. This is absolutely necessary if these organisations must survive; CSR programmes should outline areas of considerable societal or community impact

• That power has changed hands (consolidation) from the previously perceived owners of these companies (managers), to the real owners – the shareholders- must be communicated. Shareholder activism holds the key to better corporate governance and management

• Operators must constantly, through IMC, “market” discipline through improved governance and processes
• In experimenting with new forms of corporate governance, Nigerian companies should focus on using IMC to improve the quality of information and increase the speed at which it is created and distributed to the public; good communication is important to the functioning of any organisation.

Measurement of IMC Effectiveness

• Marketers rely heavily on advertising to shift market share and drive traffic to stores. Businesses spend millions to create a catchy tagline for their products/services. Unfortunately, consumers do not remember most of them, e.g. what is the tagline for Cadbury’s Bournvita?
Slogans work best when they reflect not only the soul of the brand, but the company itself and its reason for being in business.

• The only way to measure communication impact is by taking into account all the communication variables to which the customer or consumer is exposed

• Return on customer investment (ROCI) moves marketing communication to the next level. The marketing organisation and marketing communication manager identify historical returns that had been generated and from whom those returns came, as well as know how to forecast returns in a more sophisticated form

• ROCT: Return on customer touch points identifies the actual contact points between the marketer and his/her customers and uses those touch points as the basis for developing effective and efficient marketing communication programmes

• Return on Touch Point Investment (ROTPI): A touch point represents a channel through which customers interact with the firm’s products or with the firm itself. Advertising still represents a substantial portion of many firms’ annual spending

• The optimisation of advertising is therefore critical in the firm’s efforts to maximise profitably

• The organisation’s marketing strategy must be executed through an array of touch points (or channels) where the firm interacts with customers and prospects

• The concept of ROTPI is aimed at enhancing the means through which marketers can apply the Return-on-Brand Investment (ROBI) and Return-on-Customer Investment (ROCI) concepts in the marketplace.

Conclusion

In sum, we have looked at

• Corporate Consolidation and its challenges

• Corporate Governance and its challenges

• Importance of IMC

• What IMC can do for consolidation and corporate governance

• Contemporary measurement techniques of IMC

However, I would like to leave the audience with some questions to ponder:

• Should our marketing communication companies not consolidate as well? The holding company model (e.g. Troyka Holdings) offers more ways for agencies to service large marketers, which also have been growing and consolidating. Recall that in 2004 advertising giant WPP bought the last large independent agency, New York’s Grey Global for £750 million

• How do you, through IMC, convince organisations to respect the rights of shareholders and help shareholders to exercise those rights?

• Can IMC be used to make organisations clarify and make publicly known the roles and responsibilities of board and management so as to provide shareholders with a level of accountability?

• How can IMC be deployed to engender good financial reporting among organisations? The Enron collapse is an example of misleading financial reporting which saw Arthur Andersen, the partner in charge of auditing compromising.