Plans for Publicis to gain a significant presence in Japan by this autumn have been derailed by management changes at Japan’s fourth-ranked Tokyu Agency.
Publicis’ encounter with Japanese conservatism yields some insight into how the country’s management styles can turn an opportunity into a crisis. It also shows the problems faced by many executives in privately owned agencies in developing strategies to survive as Japan’s ad industry contracts.
For the best part of a year, Publicis had been negotiating to form a new joint venture agency with Tokyu. The aim was to tap into the resources of a major Japanese agency, and give the small Publicis shop in Tokyo enough credibility to win substantial business from its main international clients, L’OrÃ©al, NestlÃ©, and Renault.
Tokyu president Kim Arai was keen to internationalise his domestically focused agency, access some modern technologies, and hopefully win international clients as a result.
That the talks moved slowly was mainly a function of Tokyu’s parentage. The agency is owned by Tokyu Corporation, a Tokyo-based conglomerate which runs a private railway company and owns construction companies, hotels, an airline, department stores and supermarkets.
Early on, the railway tycoons that developed the business had been quick to spot the potential for urban development along the tracks. Essentially, Tokyu is an old-fashioned agency, but clients include NestlÃ© and Toyota.
Arai’s persistent attempts to sell the concept of building a more modern agency through an international, equity-based partnership ultimately led to him falling out with Tokyu’s owners and in July he was replaced by one of the parent company’s top executives, Hisashi Nagatoshi.
Encouragingly Nagatoshi voiced commitment to Arai’s goals but with no prior experience of running an ad agency he found it difficult to see how a joint venture with Publicis, or indeed anyone, might be a step forward. And so the talks ended.
Additionally, since Tokyu Corp had earlier vetoed the idea of selling equity in its agency to foreign interests it became so difficult to see what role internationally oriented executives might have in Tokyu Agency that those who did not leave of their own volition were encouraged to do so.
A number of other large Japanese agencies are also privately owned, by railways, retailers, media companies, or families. While agency managements often perceive the need for change, owners seldom do.
Until a couple of years ago, little had changed in Japan’s domestic ad industry, compared with the UK or the US.
Confronted with the need for change, many proprietors and managers still respond with disbelief and retreat to a state of denial.
But with billings declining (down four per cent between January and June) and margins squeezed, the pressures on old-fashioned agencies may yet force some out of existence before the rest get on the right track.