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Farah Gheith Signs of Opportunity management critique 12/03/11 Evolution of Strategy Issues of the Lamar Corporation The Lamar Outdoor Advertising Company grew from being a small town operation to becoming one of the nation’s most prestigious outdoor advertising companies. The company started out as a small sideline project for Charles Lamar Sr., and the strategies were linked through both prescriptive and descriptive strategy methods. The leaders of Lamar Outdoor Advertising Industry were all opportunists. The company pursued a constant acquisition approach, and they faced many issues and obstacles in the pursuit of their success. Their optimism along with their adaptation of corporate strategy allowed Lamar to grow to becoming one of the most respected outdoor advertising companies in America. It was a question of “heads or tails” that ultimately changed the life of Charles Wilbur Lamar. Charles Lamar Sr. was a banker from Valdosta, Georgia. He had a solid reputation as a banker, and this reputation opened the doors for him to become the third president of American National Bank in Pensacola, FL. Throughout his time in Pensacola, Lamar Sr. met John Coe, owner of Pensacola Amusement Company. The two men formed a close friendship, and in 1905 they also became close business partners. Lamar didn’t really change much of the strategy Mr. Coe had already set in place. Charles Sr. mainly wanted to focus on his banking career, but after he lost his position as bank president, he began placing his focus in the poster company. After Lamar took over as the head manager of the operation, the company was promoted to Class AA, meaning they offered exceptional service. This seemed to occur at the right time because outdoor advertising was very profitable throughout that period.

Gheith  2   Charles Lamar Sr. noticed many different opportunities that he wanted to act upon. These opportunities included the start of the expansion of the company. The outdoor advertising industry was on the rise and the yellow-pine boom brought many businesses to the area. Charles Sr. saw this as an opportunity when he decided to expand his poster company to meet the needs of growing local businesses. Pensacola’s yellow-pine boom came to a decline, and it signaled the end of the rapid local growth and resulted in dwindling international trade. The need for outdoor advertising was declining, but Lamar managed to sustain some of his local business clients. The advertising company’s downturn was reversed when Lamar Sr’ made a strategic decision to contribute to the efforts of WWI by using his billboards for promotion of American patriotism. This not only gained his company credibility, but it also brought about many new local businesses as clients. Many of these new clients were optimistic about the South and believed the area would be very advantageous in the various opportunities that it offered. Charles noticed the area’s opportunity when he discovered that the growing popularity of automobiles and the interstate highway systems would be great for his businesses. The fact that the South was dependent on automobiles rather than trolleys or trail systems was appealing to local businesses that wanted to effectively advertise their products and services. This proved to be an opportunity for the small, yet growing poster company He took advantage of the nation’s mobility and conjoined it with a decision to expand of his outdoor advertising through building more highway billboards. Lamar Sr. was able to revamp the image and vision of the small poster company with his entrepreneurial school of thought. Lamar Sr.’s strategy indicated a new path and a commitment to addressing the advertising needs of local businesses. Charles’s “bad luck” turned out to be a fortune in disguise. Even though he still considered himself as a banker, Charles was the mastermind of a soon to be expanding outdoor advertising company.

Gheith  3   Lamartine Lamar was sent to New Orleans to be a bank branch manager. His brother, Charles Lamar Jr. later joined him in New Orleans. The brothers would set out to expand their father’s poster company. They wanted to secure a presence in New Orleans by building a new plant in the area. However, General Outdoor Advertising Company (GOA) stood in the way of this plan. GOA was a very dominant outdoor advertising company, and they did not like the idea of having two small town brothers step in on their territory. Consequently, the brothers had to find a way to compete and grow in the advertising market without stepping on the boundaries of the GOA. As a result, GOA made the brothers an offer they could not refuse. The brothers were given the opportunity to sell their assets in New Orleans and buy GOA’s assets in Baton Rouge. Knowing they could not compete with GOA, they skeptically accepted the offer. Their skepticism gradually diminished as their bad fortune actually came to their benefit over time as they soon realized Baton Rouge was growing in the opportunities it offered. Texas oil companies were facing legal attacks; what was deemed to be misfortune for Texas proved otherwise for Baton Rouge. The Baton Rouge population was growing as many oil companies relocated in the area. Consequently, this oil based community proved to be recession proof and an attractive location for the Lamars and other local businesses. Originally, the company had no specified expansion plan in place. However, when Charles Jr. became manager, he wanted to focus on expanding the company into small surrounding towns of large cities. Charles knew that he could not compete with large organizations such as the GOA. However, he saw the opportunity to expand into the small surrounding towns of Baton Rouge. As a result, the Lamar family owned and operated billboards in more than 100 small and midsized towns from LA to FL. He did this by developing a decentralized sales force that was well connected with its community. This was a unique way for

Gheith  4   them to sell their boards as well as establishing themselves as a “thoughtful” company. With Charles Jr. as manager, the poster company moved closer to regionalization with every step it took. This change in strategy was marked with the founding of the Baton Rouge Poster Advertising Company. Charles Jr. continued to spread his vision across the southern coast by introducing offices in Baton Rouge, Thibodaux, Jackson, Pensacola, and Panama City. After carefully selecting Kevin Reilly Sr. to fill his position, Charles Jr. wanted to ensure that Reilly Sr. would cultivate the vision that the Lamars had worked towards. After Charles Jr. passed away in 1960, Kevin Reilly was able to incorporate Charles Jr.’s vision along with his own aspirations to become a larger, national brand. Reilly was more aggressive in his acquisition strategy than Charles Jr. was. However, Kevin Sr.’s expansion was limited by his difficulty in securing financing. At the time, advertising companies were unappealing to banks because their income statement figures did not seem promising. Furthermore, the regulations placed by Congress in conjunction with the Highway Beautification Act viewed billboards as being harmful towards the environment. As a result of the banks refusal to finance, Kevin creatively sought financing by means of combining owner financing with syndicates of investors. He would use this money to grow in both small towns and larger areas in which the company already had a presence. Lamar’s growth into larger cities was attractive to national advertisers, and the banks later offered him bank financing for the Big Tenn Advertising Company acquisition. His growth soon became out of hand; too many people were reporting to Kevin and quality control became difficult. To remedy this problem, Kevin incorporated centralized control by pooling together different branches of the company. This would strengthen the synergy among the companies and allow them some level of centralization. Lamar was able to acquire the Creative Displays organization because he took advantage of their weak and failing centralized structure. To ensure

Gheith  5   sustainability, he reorganized the corporate culture to mirror a more decentralized strategy. Unfortunately, the Creative Displays financing agreement in turn made Lamar vulnerable to the recession, and the company had to consolidate ownership of its affiliates in order to acquire the loan. The opportunity was advantageous because allowed Lamar to grow over 50%, and the new regional management structure that was added decreased the number of people that reported to Kevin. This balance allowed the company to grow and seize more opportunities. The risk of having high debt to equity proportions became uncomfortably obvious by the 1990s. During that time, banks wanted to rid themselves of old loans because the interest rate maturity mismatch of lending institutions was causing financial institutions to fail. Consequently, creditors of the company didn’t want to refinance older, lower rate debt. Thus, Lamar was faced with $85 million in debt obligation and a very limited financing budget for additional acquisitions. (Marin 118). Kevin Jr. was put in charge after his father Kevin Sr. resigned. Like his successors, Kevin Jr. was a strong proponent of opportunity over danger. He was faced with an appealing opportunity to contract Ohio Highway Logo Signs. This project cost about $5 million, but it also sent up red flags to lenders about Lamar’s habits of rewriting loan agreements. The lenders refused to rewrite the terms of the loan agreements unless Lamar would pay their balloon payment amount. Kevin Jr. was not fazed by the lender’s proposal to rework the loan in exchange for ownership. This was a smart and strategic decision on Kevin’s part, because he later entered the public offering market by issuing junk bonds to the market. These bonds turn out to be the opportunity Lamar was waiting for. After the bond issue was approved in 1993, the company paid off their debt and was able to enjoy some financial freedom without compromising their fast paced growth plans. Smith Barney underwrote their public offering in

Gheith  6   1996 with net proceeds of approximately $70.5 million. Such capital allowed them to reach the national prominence that had been planned for some 50 years prior because they were then located in 41 primary markets and 15 states all across the U.S. (Marin 138). Through their substantial market capitalization, raising capital became less of a restriction going forward, and the purchase of Chancellor Media Company became possible. Kevin pursued the Chancellor Media acquisition for a price of $900 million in stock and $700 million in cash. The benefits of this acquisition were tremendous, and the revenues thereafter grew exponentially. This acquisition transformed Lamar in to a huge industry player with exposure to 34 of the top 50 markets. (Marin 148). As a result, the company soon had to figure out a way to manage its corporate governance while adapting its management structure for national growth. The Lamar Corporation brought about happy medium between administrative control and daily operations. By the early 2000s, the 1970s structure was still in place to the extent that structure was still “centralized administrative control and decentralized operations”. (Marin 150) Lamar’s Advertising Company’s recipe for success included mixing centralization, decentralization, and optimism. It was this strategy that set them apart from competitors. The companies were centralized in that they all reported to one CEO, and decentralized in that operations decisions were autonomous. Decentralization allowed the sales staff to meet the needs of their clients, rather than forcing one major strategy upon them. It was also this very reason that Lamar was able to overtake Creative Displays and grow substantially. However, the company realized that they must centralize functions more in order to efficiently continue their growth acquisitions. The configuration process of strategy was to transform their corporate structures from being overly decentralized, to being somewhat more centralized. This in turn promoted synergies among the companies allowing them to work toward a common goal. This

Gheith  7   strategy was focused on continuity not, change. It allowed stability and a means for the company to adapt to new situations. This adaptation, along with an opportunist view allowed them to seize many opportunities. Today, the strategy process continues to reflect the idea of seizing opportunities as they arise rather than focusing on the dangers. It was this emergent thinking that allowed Lamar to go from being a small town poster organization, to being the most prominent outdoor advertising company nationwide.