Global Rankings - Asia - Asia is not only the world's third-largest PR market, but it's also the most diverse. Mark Johnson takes a look at the region, and discovers why Asia is such a rich PR challenge

Asia is the world's third-largest PR market and arguably the one offering the greatest potential for global corporations. By 2015, two-thirds of the world's population will live and work in Asia.

Asia is the world's third-largest PR market and arguably the one offering the greatest potential for global corporations. By 2015, two-thirds of the world's population will live and work in Asia.

Asia is the world's third-largest PR market and arguably the one offering the greatest potential for global corporations. By 2015, two-thirds of the world's population will live and work in Asia.

But Asia is also one of the least homogenous regions. The majority of global PR agency heads say it must be served as a sprawl of individual markets, rather than as one entity. Differences among Asia's many economies, political systems, societies, languages and business cultures amount to greater diversity than anywhere else in the world, posing unique challenges to communication on a regional level.

Nicholas Walters, chairman of GCI Group Asia-Pacific, discovered this while establishing and expanding the agency's Asian presence to six offices since 1997.

'The whole demographic, social, political and economic structure of the Asian market is not in any way regionalized,' he says. 'We like to call Japan and the Koreas 'North Asia,' but they are not the same.'

Shandwick International, which has 18 wholly owned offices in Asia - serving regional clients Hewlett-Packard, Kodak, Mastercard, Northwest Airlines and TNT - has also grappled with Asia's logistical challenges.

Alison Clarke, Shandwick's regional chief executive, says: 'Asia will always be a challenge to PR agencies. One office can't serve the whole region. There are not many economies of scale with so many markets separated by land and languages.'

Opportunities abound

But along with the challenges, opportunities abound as well. China, with a population of 1.2 billion emerging from a controlled economy to one of flourishing consumerism and burgeoning stock markets, is the most important PR market.

Consumer products companies such as Coca-Cola and Pepsi have plowed huge marketing budgets into China in the past five years, as have mobile phone companies Ericsson, Nokia, Motorola and Siemens. Official statistics show the number of mobile phones in China jumped 40% in the first half of 2000 to 59.2 million units, and is expected to surpass 70 million by the end of the year. China is expected to be the second largest mobile phone market in the world, after the US, in the near future.

China's entry to the World Trade Organization also promises to make it a huge market for PR. Car manufacturers Ford, General Motors and Daimler-Chrysler are investing heavily in raising their profiles in the country.

Healthcare companies Pfizer, Rhone-Poulenc, Aventis, Novartis, and SmithKline Beecham continue to invest in issues-based marketing of over-the-counter and prescription drugs, led mainly by PR campaigns.

The challenge for PR companies who hope to work with global corporations targeting Asia is developing local market knowledge. Media is organized, reported and distributed differently in many Asian countries than in the West. In Japan, for example, a system of local press clubs requires media outlets to be club members before they are alerted to certain types of news events. In fact, PR in Japan in general is very different, with more of an emphasis on paid 'advertorials' than the normal media relations 'pitching.'

Bill Rylance, president and CEO of Burson-Marsteller Asia-Pacific, who spent 14 years building Merit Communications in Korea before it was acquired by Burson last year, says the real cultural differences between East and West easily find expression on the job.

Cultural crossroads

'Pity the expatriate manager fresh from London or New York who imagines that Korean employees recognize individual or company performance as key determinants for personal growth and success,' says Rylance. 'And woe betide the manager who attempts to pressure them into higher levels of performance before the foundation of trust and relationships are established.'

Also impossible to ignore is the language issue, which is best overcome by using locally trained employees. Apart from English, which is used everyday in Hong Kong, Singapore and the Philippines, Mandarin Chinese is the lingua franca in many Asian countries.

In China and Taiwan, Mandarin is essential, but it is also used in Singapore and Malaysia, while countries such as Japan, Korea, Indonesia and Thailand are accustomed mainly to their mother tongue. Bilingual locals with PR skills are therefore at a premium.

Almost certainly the best known of these is Li Hong, managing director of Ogilvy PR's Beijing offices since 1999. One of China's leading public affairs professionals, he has that rare blend of impeccable government contacts in Beijing and an international education which includes a three-month Advanced Management Program at Harvard Business School.

Since starting his career in 1983 at the Chinese Ministry of Culture's Bureau of External Cultural Relations, Li says he has worked at bridging the gap between China and the outside world through communications.

'I worked with the government when China was just opening its markets during the 1980s, but I moved to the private sector to help companies set up here,' says Li.

During his government years, which included a stint as a Ministry of Culture vice consul with the Chinese Consulate General in New York, Li arranged numerous Sino-US cultural exchanges, including Chinese participation in the Second International Ballet Competition in New York in 1987. His current clients include Kodak, Nokia, Axis, BMW, Allianz Insurance and Rover.

The influence of locals such as Li Hong would have been unthinkable, however, without the expansion of global brands, and global agencies.

The first firm to penetrate the Asian market was Hill & Knowlton. Off the back of an Australian base, H&K established its first Asian office in Singapore in 1961 and in Hong Kong a year later. In another first, in 1984 H&K became the first Western public relations agency to receive Chinese government approval to operate in China. It now has 13 branch offices and 10 affiliates in Asia, and remains the largest agency in the region.

During the '60s and '70s, the nascent PR industry in Hong Kong mainly served local conglomerates such as the Jardine companies and Hong Kong and Shanghai Banking Corporation (HSBC), managing press events. Among the first independent agencies to experience major growth was Jeff Mann & Associates (now PR Partnership), which built a regional network during the '70s, managing large-scale Hong Kong sports events such as rugby matches and car races. Its media relations clients were among the earliest global companies: Philip Morris, Colgate-Palmolive and Unilever.

The industry has matured since then, although the notion that PR might be an answer to a business problem is still a relatively unfamiliar concept in Asia. Moving PR up the marketing food chain has been the prerogative of the global agencies, says Brian West, regional chief executive of H&K.

'Recognition of what we can contribute is there,' says West. 'We're sitting at the table with CEOs, CFOs and the board.'

Recession and recovery

One of the biggest catalysts for change has been the recession. PR was hit, like all businesses, when the recession came in 1997. Asia accounts for an average of between 10% and 15% of revenue for most global agencies, and this shrank significantly during the crisis.

Worst hit was Southeast Asia, but though it has recovered since then, the improvement is only marginal. Indonesia's economy grew by 3.9% this year, while Thailand is expected to grow by 5.2%, with both countries struggling to clear corporate debt problems. Malaysia by contrast, after implementing unusual capital controls during the recession, is predicting 8% growth.

Agencies across Asia were affected by the crisis, with most biting the bullet by working longer hours for clients on smaller budgets. Burson was the worst hit. Between 1997 and this year, the Young & Rubicam-owned agency spun off its offices in Malaysia and Thailand, pulled out of Adelaide, Australia, and downsized in Hong Kong from more than 140 employees in 1996 to only 33 two years later.

The firm was hurt, in part, by the generous (overly generous, it turns out) compensation deals it offered Western managers to relocate to Asia to run its offices, and by a host of unprofitable clients, most of whom Burson cut loose in late 1999.

The turning point for the world's largest agency came late last year when it re-entered the Korean market with the acquisition of Merit Communications.

Burson's 16 Asian offices have seen revenue gains of 41% in 2000, with Japan leading the way and Hong Kong close behind. Burson helped its cause with several major account wins last year, including the dollars 5 million Inchon Airport win in Korea, a huge government project in Hong Kong to re-brand the city worldwide, and the global financial account for the restructuring of Korea's Hyundai.

Another big player in the region is Ogilvy. A quarter of its global staff lives and works there, although Asia accounts for only 10% of global revenue. The agency survived the Southeast Asian crisis and is reporting strong gains this year through focusing its services based on demand.

'The recession has been healthy for us,' says Matthew Anderson, regional president of Ogilvy PR. 'We've defined what we wanted to be good at.' Ogilvy's Malaysia and Indonesia operations are growing by 30%, with the Philippines up 37%. Anderson defines the agency's strengths as M&As, crisis management, internal communications and brand-sensitive marketing.

Indeed, this mix is typical of the PR work that has been most in evidence because of the recession. An explosion in M&A and financial restructuring projects, linked to the financial sector's troubles and the withdrawal of investments by multinational corporations, served to offset some agencies' losses.

Shandwick picked up two major restructuring projects for Malaysia's Bank Nagara and Thai company Siam City Cement. Clarke says, 'We didn't close any offices. We held our nerves when things became difficult. Now we're glad we did, because in 2000 we would have started on the back foot.'

In Singapore, Shandwick's profits this year are up 22% on income growth of 32%. One of the markets least affected by the recession, Singapore reported an 11% rebound in the second quarter, with full-year growth forecasts at 7.5% to 8.5%, led by the island's semiconductor and telecommunications equipment industry.

Hong Kong and Singapore continue to be the profit and revenue generators for the region. Hong Kong, the preeminent launching pad for products and business ventures into China, is on a recovery track with GDP forecast to reach 8.5%. Shandwick reports a 103% boom in profitability in its Hong Kong office, on income growth of 38%.

Omnicom-owned Ketchum-Newscan, with five offices in Greater China, has bet a lot on the potential of the world's most populous nation, China, and it appears to be paying off. Ketchum-Newscan has grown 22%, and staff levels are up 85%, to 40. Tech has also been key. Ketchum was one of the few agencies to make an acquisition in 1999, buying Singapore technology shop SparkTech. Now, says CEO Kenneth Chu, 'We will be launching a technology convergence group to promote cross-fertilization with the brand practice, and with the corporate relations practice for Internet-related firms.'

H&K has a significant Singapore presence as well. H&K has specialized in banking, finance, insurance and technology. Its clients include BT, Compaq, Goldman Sachs, Microsoft and Motorola.

Edelman is reporting 'modest growth' in 2000, according to regional president Jerry Hendin. The firm serves a range of clients in more than one Asian market, including Visa, Procter & Gamble, Ericsson and Johnson & Johnson.

Shopping spree

Perhaps the best sign of recovery from recession has been a raft of recent acquisitions.

BSMG acquired Hong Kong- and Singapore-based financial and corporate agency Scotchbrook Communications. And IPG subsidiary Golin/Harris snapped up leading Hong Kong public affairs and financial agency Forrest International.

And of course there are other targets. Arguably the hottest acquisition target right now is Newell Public Relations, Hong Kong's largest hi-tech PR Agency, with revenues of dollars 3 million and 45 staff. After starting out alone in 1993 without even office space in which to serve his first client, the Business Software Alliance, managing director Stuart Newell has conducted the Asia launch of many of technology's biggest brands, including Yahoo!, Gateway, Cisco Systems, Symantec, and Adobe Systems.

Newell says the future of the agency lies on the consumer side of IT: 'We work for technology-driven companies, not just those in IT.' The change in direction is bearing fruit. Income grew by 80% this year, and the agency was one of the first to renew its expansion plans after the recession, opening its second office, in Beijing, last year. The agency now serves Juniper Networks, Cisco Systems, Citrix Systems and The WAP Forum in Greater China, an initiative directed by Western companies to standardize mobile phones.

Another enduring figure of the Asian PR scene is Michael De Kretser.

He began his career with Australia's Liberal Party before taking a job with a major PR agency in Britain. He was transferred to Singapore in 1982, a time and place in which 'PR was an unknown commodity.'

This made him decide to brave the agency world with his own venture, Michael De Kretser Consultants. Eighteen years later, with more than 100 employees and offices in Singapore, Malaysia and Thailand, the more than dollars 3 million company is considered one of the best-positioned agencies for handling client business across some of the toughest parts of Asia. De Kretser's Malaysia and Thailand operations were hit hard by the recession, but held out for recovery and avoided laying off employees. The firm has worked with a wide range of clients including Federal Express, Raffles Hotels, Rolls-Royce, Siemens, Mazda and Apple Computers.

Having survived the '98 recession at ground zero, De Kretser explains his success in no-nonsense terms: 'Unlike many of the multinationals, we had to prove ourselves on the ground - that means winning business in our country, proving ourselves in that country and that region.'

Perhaps the most intriguing new presence in Asia is The Hoffman Agency, a Silicon Valley-based firm which like De Kretser and Newell has started from scratch. Eschewing acquisitions and wading into Asia on its own, The Hoffman Agency opened its fifth Asian office in Korea in late summer, and now has a presence in all the major Asian hubs. The British tech firm Text 100 opened offices in Hong Kong and Singapore during the recession, with each dedicated more to global and regional clients than local companies.

ASIA PR AGENCY RANKINGS 2000

Ranking Agency Name Asian Income (dlrs) %

99 98 99 98 chge

1 1 Hill & Knowlton 19,426,000 19,540,000 -1

2 N/A Shandwick 16,537,000 N/A N/A

3 2 Burson-Marsteller 15,167,000 16,840,000 -10

4 3 Ogilvy 13,053,600 11,589,000 13

5 4 Edelman 10,389,814 10,886,708 -5

6 N/A Incepta/Citigate Dewe Rogerson 8,436,485 N/A N/A

7 5 Fleishman-Hillard 7,922,000 5,697,000 39

8 7 GCI Group/APCO 5,140,674 3,903,866 32

9 6 Porter Novelli 3,111,000 4,588,000 -32

10 12 Manning, Selvage & Lee 2,994,000 13,600 21915

11 N/A Weber 2,346,912 N/A N/A

12 9 Ruder Finn 1,273,000 1,194,000 7

13 8 BSMG 1,112,719 1,523,920 -27

14 10 Text 100 990,851 508,410 95

15 11 Brodeur Worldwide 300,000 100,000 200

TOTALS 80,880,658 76,384,504 6

Sources: PRWeek Top Agency Rankings; PRWeek UK European Rankings.

Auditing: Please refer to main chart on pages 30-31 for audit

information.







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