CAREERS MEDIA: Management of multinational agencies in China

<p>Multinational advertising agencies in China have witnessed and </p><p>pioneered much change since they initially entered the Chinese </p><p>advertising industry two decades ago, following their global clients who </p><p>were testing the waters of China's opening markets. </p><p><BR><BR> </p><p>As the advertising industry has leap-frogged into a new era, advertising </p><p>executives are convinced that much has been achieved, but much still has </p><p>to be done in tackling the Chinese market, which is not only huge in </p><p>terms of turnover but also in its sophistication and diversity. </p><p><BR><BR> </p><p>"There is not much to be told about the '80s, as multinational agencies </p><p>were only allowed into China as representative offices," said Mr Bernard </p><p>Yiu, MD for Hong Kong and China for Dentsu Young & Rubicam, who came to </p><p>China in 1979. "You had to work with designated mainland advertising </p><p>companies; there was no choice and no control, so agencies were </p><p>restricted to performing simple tasks." </p><p><BR><BR> </p><p>However, things changed in the '90s after international agencies were </p><p>able to form joint venture partnerships and thereby gain more control </p><p>over their operations on the mainland. "By the mid '90s most agencies </p><p>had signed up joint venture partners. Everyone was running like mad </p><p>dogs. </p><p><BR><BR> </p><p>For the first couple of years one could get by while not looking at the </p><p>bottom line," said Mr Yiu. </p><p><BR><BR> </p><p>"Agencies faced numerous obstacles," said Mr Louis Wong, who has worked </p><p>for McCann-Erickson in various markets, including Hong Kong, Taiwan and </p><p>South Korea before setting up the McCann Erickson office in China and </p><p>starting his own agency, MegaCom, in 1993. "Bureaucratic problems arise </p><p>and need to be solved on a case-by-case basis. A primitive media market </p><p>with no ratings or monitoring services and a lack of a talent with </p><p>creative and professional skills also added to the problems in the </p><p>beginning. </p><p><BR><BR> </p><p>"But things are relative," Mr Wong added, "and compared to seven years </p><p>ago, the situation has improved greatly." </p><p><BR><BR> </p><p>Many expatriates - mainly Asian - were hired to run and train local </p><p>staff which made multinational agencies a lot more costly than local </p><p>agencies. </p><p><BR><BR> </p><p>Now, local middle management has been trained up and is pushing into the </p><p>positions and "much emphasis needs to be given to choosing the right </p><p>senior staff," said Mr Yiu, "as they need to have strong advertising and </p><p>marketing skills but also strong leadership skills." </p><p><BR><BR> </p><p>Job-hopping and keeping trained-up staff have been other worries for </p><p>agencies in an industry starved of good talent. "You can't keep people, </p><p>and even the average ones keep on moving which makes an agency difficult </p><p>to manage," said one executive, "but you just cannot take it </p><p>personally." </p><p><BR><BR> </p><p>MindShare has recently hired a new training director. "We have to train </p><p>people and let the staff know where they are going," said Mr Eddie </p><p>Cheng, the newly-appointed managing director for MindShare Beijing. </p><p>"There needs to be a light at the end of the tunnel." </p><p><BR><BR> </p><p>At the same time, the mainland media market has developed and become </p><p>more sophisticated. Now, peoplemeters are increasingly finding their way </p><p>into sample TV homes in major cities as ACNielsen and CVS (a joint </p><p>venture between CVSC, a CCTV subsidiary and French Sofres Group) both </p><p>invest in the roll-out of expensive systems. </p><p><BR><BR> </p><p>In an increasingly fragmented and commercially-driven media market, </p><p>competition is forcing media vendors to improve their services and </p><p>accountability. </p><p><BR><BR> </p><p>While media independents still complain that personal relationships play </p><p>an important role in negotiating bulk media buying rates, major TV </p><p>stations are becoming accountable to market mechanisms and the bottom </p><p>line. </p><p><BR><BR> </p><p>While the media industry is improving in sophistication, so is the local </p><p>advertising industry. The Seventh China Advertising Awards held recently </p><p>in Wuxi proved that local agencies are realising their competitive </p><p>advantage. </p><p><BR><BR> </p><p>"While before there was a lot of copying of ideas going on and we had to </p><p>disqualify these entries, local creative people are becoming much more </p><p>confident in realising their own ideas," said Mr Wong, who was on the </p><p>judging panel of the awards. "Also in the past, execution was the </p><p>failure of everything and a lot of money was spent on unnecessary </p><p>things." </p><p><BR><BR> </p><p>So far, there has been little competition between local agencies that </p><p>mainly serve local clients and international agencies which mainly work </p><p>with globally-aligned clients. </p><p><BR><BR> </p><p>While growth in the industry is increasingly coming from local brands, </p><p>accession to WTO may reverse that trend in the short term, but it is </p><p>local advertisers who need to be convinced of the value added service </p><p>international agencies promise to deliver in the long run. </p><p><BR><BR> </p><p>"Now is the turning point for multinational agencies," said Mr Wong. "We </p><p>will continue working together with multinational clients, as most of </p><p>them use international agencies. However, local clients are also </p><p>becoming major players and the big challenge is to get into the local </p><p>market in order to sustain stable growth." </p><p><BR><BR> </p><p>So far, this has proven difficult. As Mr Tomaz Mok, general manager and </p><p>ECD with McCann-Erickson Guangming Beijing explained, "Localisation of </p><p>business has been a painful learning curve. Local brands are less </p><p>interested in long term strategic planning, while continuously shopping </p><p>around for the best deal. In this case, local agencies can offer cheaper </p><p>services, but still cannot compete with international agencies when it </p><p>comes to strategic thinking." </p><p><BR><BR> </p><p>While international agencies struggle to bring down overhead costs in </p><p>the primary cities of the country in a bid to be more competitive, </p><p>clients are moving out of Beijing, Shanghai and Guangzhou into secondary </p><p>markets forcing agencies to follow suit or lose business to local </p><p>firms. </p><p><BR><BR> </p><p>"Agencies need to consider if it is financially worthwhile to open </p><p>offices in secondary markets," said one executive. </p><p><BR><BR> </p><p>However, with double-digit growth in adspend continues unabated on the </p><p>mainland, agencies remain optimistic, although they are rethinking their </p><p>strategic direction. </p><p><BR><BR> </p><p>As China's media industry is becoming more fragmented and sophisticated, </p><p>syndicated research will become increasingly important in effectively </p><p>identifying target groups. Others are also opting for the alternative of </p><p>proactively creating innovative media vehicles for target groups. </p><p><BR><BR> </p><p>Source: CMM Intelligence. </p><p><BR><BR> </p>