Saatchi & Saatchi Worldwide: Globalization and Diversification
at 6:34 PM
1. (a) Why did Saatchi & Saatchi decline?
(b) What would you have done differently at Saatchi & Saatchi to avoid the downturn at end of the 80s: "pause for breath in... growth"?

There are many reasons behind the decline of Saatchi & Saatchi. The reasons are:
• Decline of trust among client companies and issues regarding confidentiality and conflicts of interest;
• Saatchi’s acquisition efforts are no longer effective;
• Weakening management focus, whereas the Saatchi brothers are no longer interested in Saatchi and shareholders;
• Poorly handled earn-out and acquisition deals; and
• Saatchi’s share significant drop.

As seen in the previous performance of Saatchi before 1988, the company was performing expressively and shows some strength in their arena. But despite of this performance, there were some indication in 1986 that the company was losing their focus. As they purchase Bates in 1986, Saatchi now suffers from a string of client account losses and staff departures. In this time, there are lots of accounts lost because of issues regarding confidentiality and conflict of interest. Basically, client companies did not want to deal with the same ad agency as their competitors had. For this reason, Procter & Gamble and Colgate-Palmolive withdrew hundreds of millions of dollars worth of business because Saatchi also carried a competitor's account.
In addition to this issue, the departure of Saatchi's top financial executive Marten Sorrell also hurt the company. In his stay at Saatchi, Sorrell expertise was incomparable. Aside from Sorrell’s expressive financial expertise, he also played significant role in gathering number of investors and shareholders. But as he leaves the company, no one replaced him as a mediator between management and the shareholders. This created significant impact to the company as the shareholders/investors perceived that the Saatchi...