CAREERS MEDIA: Management of multinational agencies in China

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

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