Realities of the political environment in strategic management: Brexit and the ad industry

It is expected that the TV ad revenues in the UK will decline by 8% in October. This follows a 5% fall in TV ad revenues in September. It is also predicted that this decline will continue in November with the decline being at 7%. The comparisons have, however, been tainted by the Rugby World Cup which ended in October 2015. This means that as the comparisons show a decline in the 2016 figures, analyst must acknowledge that the TV ad revenues of 2015 are likely to be higher than usual due to the effect of the London Rugby World Cup. November has arguably been said to be the clean month in which the base year was not under the influence of the Rugby World Cup. But this view may not be accurate since the effect of the world cup would normally be evident in the hosting country one man after the conclusion of the tournament.

But concerns about the Brexit having caused the decline in ad revenues in TV are justified such comparisons have been made between the UK and other European markets. Other markets are noted to be performing better than the UK. This has led to fears that the Brexit will continue to hurt the local market before the UK adjusts and adopts sound economic policies that will reverse this pessimism. In fact, the Guardian estimates that as a result of the Brexit, the TV ad market could shrink by about 2% in 2016 alone. This is a significant percentage and ought to be a cause of concern for the industry practitioners.

As the UK grapples with the effect of the Brexit, an issue that needs to be highlighted is the influence of the political environment on strategic management in business organisations. In this case, the industry players in the TV ad industry are the organisations of concern. As a result of the Brexit vote, the UK currency is reported to have plummeted. This forced organisations to cut their advertisement budgets as they had to consider the impact of their dwindling profits. Non-essential items in their budgets were seemingly cut off.

By the trend in the TV ad revenues, it is clear that organisations consider marketing as one of the less important elements of strategic management. Strategic marketers would argue that this is a strategic blunder for the organisations in question. But the alternative explanation could be that in order to cope with dwindling balance sheets, the organisations have opted to rely on less expensive forms of marketing. The online marketing explosion could be one of these beneficiaries. But on the whole, the overall marketing budgets have reduced. The drop in revenues in TV ad revenues are not reflected in the increase of revenues in online ad revenues. This justifies the assumption that organisations consider marketing budgets as less essential expenses.

More importantly, the effect of Brexit demonstrates the effect of political factors on the market and business enterprises. Brexit is expected to continue causing uncertainty in the market. But as has been observed in many previous studies, it is the organisations that manage to sustain aggressive marketing that end up being more successful after the uncertainty has been reduced. A study should be done to compare marketing budget trends on the organisations that will emerge as the big winners after the Brexit uncertainties are done away with.