Last year was one of impressive growth for Ogilvy & Mather
Asia-Pacific but regional chairman Miles Young isn't satisfied - not by
a long shot.
The agency chalked up a revenue growth of some 30 per cent to an
estimated USdollars 1.9 billion, had a hand in winning the USdollars 400
million global Motorola account which will almost ensure double digit
growth for it in the region in 2001, and aggressively expanded its
Internet advertising and marketing services.
But instead of taking it easy for a bit, Mr Young has over the past few
months been huddled with his inner circle of senior executives pondering
over the next move.
And for the next move, his gaze has fallen on Korea and Japan because
they are huge markets in their own right and because these countries are
now less inward-looking and xenophobic and more responsive to external
influence.
Mr Young, therefore, believed that North Asia is where his agency would
likely see the biggest growth opportunities in the next five years.
"In a portfolio as big as O&M's, there are huge issues to do with
relative strengths and weaknesses in different parts of the region. So
what we have to bear in mind is that while we have been strong in most
parts of Asia - Hong Kong, China and Southeast Asia in particular - we
have been relatively weak in North Asia, that is, Korea and Japan.
"Looking ahead, my absolute priority is to increase our presence there
over the next few years," Mr Young told MEDIA.
O&M has had independent offices in Japan for about five years and in
Korea less than two years, which isn't that long considering that some
multinational agencies have had a presence in those markets for
decades.
Mr Young said that "you don't have to be a genius to figure out that
Korea and Japan" are the markets with the largest potential together
with mainland China.
Because of the new focus on North Asia, Mr Young will spend more time in
Korea and Japan. And in order for him to do that Mr Tim Isaac was
recently promoted to regional vice-chairman with special responsibility
for Asean markets.
One of Mr Young's biggest challenges will be to expand O&M's client base
to include more local companies.
"This is the most intellectually and physically challenging task we
could set ourselves, but having said that I must say that we are
starting to build a local client base which is a positive
development.
"In a normal situation, O&M would expect a 50:50 local to international
client base, but in Korea and Japan our mix is heavily skewed towards
multinationals."
A major reason for the skew has been because the agency has decided to
go the independent route and not buy into local agencies.
"I would rather have no local business at all than have a whole bunch of
management problems arising from a buyout which diverts us from properly
servicing our international clients. Simply slapping your brand name
onto a poor quality local agency is really not the answer," Mr Young
said.
The slow, painful independent route appears to be the sensible course to
take, especially since there is now more interest in the Western style
of branding and brand building in Japan and Korea brought on in part by
economic slumps - long drawn out and chronic in the former and
short-term but dramatic and severe in the latter.
Branding has also become more important because of the fragmentation of
media and because of an explosion of product and service choices.
However, O&M will have to demonstrate the value of its various
communications disciplines because in Korea and Japan, agencies are paid
on a commission system, which results in them giving away services such
as interactive, PR and below-the-line as an added value.
"It's not strange for them to operate in this manner. They regard many
of the communications disciplines as lost leaders because the way they
make money is through a commission system which is highly generous to
advertising agencies."
Nevertheless, Mr Young stressed that changes are occurring "not a sea of
change, but changes nonetheless", which would allow an agency like O&M,
which is positioning itself as a provider of 360-degree solutions, to
carve out a substantial niche for itself in market such as Japan.
"Going in as a traditional agency - earning from buying media - isn't
going to cut it. Our point of differentiation is the fact that we offer
360-degree advertising solutions.
"That is our strategy and we strongly believe that it will be successful
because there is genuinely a passionate interest in a Western recipe of
branding and brand-building," he said.
