Following the flurry of mega-alliances between Japanese and foreign
networks, Hakuhodo's new president and CEO Toshio Miyagawa has made it
his mission to redefine and safeguard the agency's position in both the
local and global market.
Mr Miyagawa's guiding business principle - "Hakuhodo's basic strategy is
to be in tune with advertisers" - reflects his reputation as a
top-flight salesman.
"We're building our network to provide the best to each client and
regional area. As such, we will not enter alliances or make acquisitions
out of context with advertisers' need," said Mr Miyagawa.
Hakuhodo's nearest counterparts, Dentsu and Asatsu DK, respectively No.1
and No.3 in Japan, with Hakuhodo at No.2, recently allied with global
networks.
Faced with competition from these consolidated advertising
conglomerates, Mr Miyagawa told MEDIA that Hakuhodo had no plans as yet
to pursue "a merger or alliance with any multinational".
However, Hakuhodo would consider forming alliances with multinationals
on an ad hoc basis, with the aim of serving special needs of its
clients.
Citing the recent alliance with Omnicom's TBWA to form a global agency
designated to handle the Nissan account, Mr Miyagawa said: "This too was
based on our policy of organisation based on client requests."
Agencies usually merge to form advertising Goliaths in a bid to
strengthen their global positioning; however, Mr Miyagawa said the
merger and acquisition situation "is still very liquid".
Recent industrial consolidation does not necessarily mark the final
development on the advertising landscape; as Mr Miyagawa said, it "does
not preclude future unbundling through sell-offs".
Advertising agencies marry for three main objectives: expanding
services, strengthening media buying clout to achieve economies of
scale, and enhancing business functions.
Hakuhodo's key strategy at the moment is to provide advertisers with new
possibilities in marketing and advertising.
"We've not sat down and said we would form partnerships with this
agency, but not that one. If necessary, we will talk with any agency,"
said Mr Miyagawa.
In the wake of the economic recession in Japan, Hakuhodo experienced a
profit dip over the past two years, with total operating profit dropping
12.6 per cent to Y7.1 billion (US$62 million) in the fiscal year
ending November 1999.
However, total sales improved from 1998's negative 3.1 per cent to
1999's negative 2.8 per cent.
Despite this, Hakuhodo in fact increased its market share during the
downturn.
"The fundamentals of the Japanese economy have been radically
revised.
I believe there will be a shift from the traditional material-led
industry toward the IT industry," he said.
"The IT revolution will reduce production, distribution and other costs
associated with doing business - this will mean marketing activities
will account for a greater proportion of the total."
Internet and digital broadcasting advertising will lead growth,
according to Mr Miyagawa, who said Hakuhodo planned to strengthen its
one-to-one Internet marketing skills.
Founded in 1895 as an advertising space broker for educational
magazines, Hakuhodo plans to list on the Tokyo Stock Exchange in
2004.
"Our plans to strengthen our business through enhanced global network
infrastructure, digital functions, and new tools in our current key
competencies will require a sizable investment," noted Mr Miyagawa.
"In principle, we will fund this from profit, but if further investment
should be required, we would like to be able to respond."
With more foreign players buying into Japanese agencies, Mr Miyagawa
said competition was becoming stiffer, not only from multinationals but
also local counterparts.
Client servicing was a crucial part of the agency's strategy; as Mr
Miyagawa said, "the only way to beat the competition is to lift the bar
on the quality of services".
Boosting the agency's global networking resources, enhancing integrated
services in the media, branding and advertising disciplines, and
strengthening Internet marketing skills are the three key areas Hakuhodo
is actively looking into, he said.
Joining Hakuhodo in 1958, Mr Miyagawa is one of the agency's first heads
with a strong account servicing background.
"Over time, marketing methods became more complex, and full service
Japanese advertising agencies increased their functions gradually," Mr
Miyagawa told MEDIA.
