Dangerous Opportunities at Lamar Advertising

Dangerous Opportunities at Lamar Advertising

If there were ever a company that has exemplified the importance of continuous growth through resolving strategic issues and creating new opportunities, it would be Lamar Advertising. Through over a hundred years of hard work, determination, and the descendents of Charles W. Lamar, the company has grown to enormous success. However, if it had not been for Charles W. Lamar's so believed unlucky coin toss, the tiny poster company in Pensacola, Florida would have never become Lamar Advertising, a member of the NASDAQ-100 index. Lamar's leaders encountered numerous threats, each with the potential of impediment on Lamar's growth and prosperity; but through persistence and the will to overcome each issue the leaders were able to find new opportunities to capitalize on. According to Signs of Opportunity, by Dan Marin, Lamar Advertising's decisions pertaining to strategic issues is best illustrated by the company's primary strategy: "to position itself to seize opportunities as they arise" (Marin 154).

Lamar's first conversion of a loss into a victory was the "unlucky" coin toss between Mr. Lamar and Mr. Coe. In 1908, Mr. Lamar's partner Mr. Coe decided he was ready to retire, dissolve the partnership, and divide their jointly owned assets by a coin toss, the assets being the Pensacola Opera House and its complimentary poster company. Mr. Lamar ended up losing the toss leading to Coe taking the Opera house and Mr. Lamar getting the Poster Company, what appeared the less profitable asset of the deal. However, due to the unanticipated growth in the automobile industry, a new opportunity presented itself, the outdoor advertising industry. Ironically, what appeared to be the better of Mr. Coe and Mr. Lamar's assets (the Opera house) soon began to face difficult obstacles. The obstacles being new competition from other forms of entertainment and the economic uncertainty in Pensacola due to scarcity of the local yellow pine. In just ten years, what appeared to be the better end of the coin toss turned into a closed down facility due to major damages from hurricanes.

The outdoor advertising industry began to grow at a rapid rate due to the steady increase in the use of cars and development of roads. Lamar's poster company decided to take advantage of the growing market by standardizing the posters and expanding into new markets. During this point in the company's history both sons, Charles Jr. Lamar and L.V Lamar (who was an investment banker), became involved in the business (Marin 65). The two brother's central focus was on expanding into the New Orleans area by "establishing a New Orleans billboard plant."

However, General Outdoor Advertising, a major leader in the eastern U.S. market, already had a substantial share in the New Orleans billboard market. Once GOA realized that Lamar was a potential competitor they offered to buy out the Lamar's billboards in New Orleans and sell Lamar their Baton Rouge billboards. Though this business transaction would eliminate the Lamar brother's dreams of developing a billboard company in New Orleans, they knew that if they went head to head with GOA that it could be harmful to the company's future. The brothers took the deal.

Even though Baton Rouge was considered as the boondocks and a hindrance to the brother's plans of expansion, actually proved to be quite on the contrary due to Baton Rouge's developing oil based economy. The capitol city and surrounding areas grew in wealth and population, and as a result, so did their needs for marketing their growing businesses. Lamar saw the cities' growing demand for advertisement as a huge opportunity, which later became "a source of competitive advantage for many years to come." (Marin 70). Thus, what was initially deemed as a set back in Lamar's plan for success, essentially allowed them to become "a dominant leader in the nation's smaller cities and small-town markets." This new found market niche giving Lamar a new and improved vision for expansion and growth.

Through Lamar's newly acquired niche of small towns and their steadily growing purchases of billboards the company began to sore to new heights. However, obtaining financing for Lamar's acquisition of assets soon became an issue. Due to multiple reasons, Banks started to become apprehensive towards outdoor advertising. The first reason was the Highway Beautification Act, which regulated outdoor advertising. The second reason being the bank's fearing the depreciation costs for billboards "reduced the reported bottom line" of the income statements, even though the billboards produced revenue after being fully depreciated and allowed for major tax write-offs (Marin 96-97). Lastly, due to the new environmental quality movement many began to view billboards located in beautiful areas in a negative light. It was for these reasons that many outdoor advertising companies closed and Lamar had to either find a new way to finance their projects or face their demise.

It was Kevin Reilly, the husband of Charles Jr.'s niece and Lamar's CEO, who began to vigorously search for alternative sources to fund Lamar's old and new acquisitions. Reilly addressed the company's issue by an aggressive acquisition strategy of "combining owner financing and syndicates of investors." After Reilly had generated enough capital the company purchased a number of separate companies. Each of the companies were separate entities and had their own officers and board of directors, but all implemented Lamar's aggressive acquisition strategy for many decades to come (Marin 98).

However, Lamar not only had to face strategic issues pertaining to financing, but also the devastating destruction caused by Hurricane Frederick in 1979. Hurricane Frederick "knocked over half of the Pensacola plant's billboards and 90% of Mobile's" (Marin 107), but that did not faze Lamar's desire for growth. Lamar took their "aggressive building and acquisition program" and in just 6 months after the devastation, the Pensacola and Mobile plants emerged stronger than before. The old wooden billboards that had been destroyed were replaced with steel billboards, which generally were