Overview of the Advertising Industry in the UK
Overview of the Advertising Industry in the UK
I. Introduction
The UK advertising industry has been at the forefront of the global market for several years now and is set to stay that way. The reason the advertising industry in the U.K has become world leader is due to a number of factors, primarily due to the strong economic structure in the U.K at present, but also a result of a number of political, economic and commercial events that have required active promotion.
British advertising has gained a reputation over the past years as being the worlds most creative and effective, with adverts such as the Tango campaign, Hello Boys and Levis pushing the industry to the forefront.
II. Market Analysis
2.1 Market Size
The UK advertising market is a growing market; between 1992 and 1999 the advertising expenditure rose by 171% to exceed £15 billion in 1999 for the first time. The following graph illustrates the strong growth this market has experienced.
Source: Advertising Association
Key events that were partly responsible for this development were the Millennium, the Sydney Olympics 2000 and the launch of Digital Television in the UK. The enormous competition in new technology market such as Internet or mobile phones is also a reason why advertising expenditure increased so strongly.
Market forecasts predict a further growth; expenditure is prognosticated to increase by 60% by 2004 so that the market value would reach £19 billion. (Euromonitor 2000)
2.2 Market Segmentation
In 1999, Newspaper and Television advertisings are with the biggest market segment, they totally account for 58% of the total expenditure. It is followed by Direct mail with 12%. All sectors have grown constantly since 1993 and further increase is expected for the future. The introduction of digital television and the emergence of more private channels could result in a much stronger growth in this sector.
Appendix 1 and 2 and 3 illustrate the growth in the different segments with a graph and a table.
2.3 Porter’s Five Forces
Rivalry between existing firms
There is intensive rivalry in the market because agencies need constantly to win new accounts. The normal procedure is that agencies pitch for new business, but even for existing accounts clients often demand a repitch. Accounts of important clients are worth millions of pounds and agencies compete directly with each other therefore rivalry is an important factor in this market.
Threat of new entrants
Clients organise pitching and switch agencies regularly to ensure that their...