Dentsu Turns East for Growth

Tokyo Office Will Help Japanese Firms Set Up Shop in China

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TOKYO ( -- Eager to expand in a market more robust than Japan, where ad spending fell 11.5% in 2009, Dentsu is looking for growth in neighboring China.

Japan's largest ad agency is setting up Dentsu Marketing East Asia, a division based in Tokyo that will help Japanese companies gain a foothold in mainland China, one of the world's most robust ad markets.

Dentsu's Yutaka Ikeda
Dentsu's Yutaka Ikeda
A commanding grip on Japan's advertising and media industries has built Dentsu into the world's fifth-largest agency, according to Ad Age rankings. But Dentsu has struggled to emulate its success in Japan overseas, even during good economic times.

The global recession made the battle even harder. Last spring, Dentsu reported that its net income fell $209.4 million during the fiscal year ending on March 31, 2009, its first annual loss in more than a century.

Dentsu Marketing East Asia will open April 1 with 12 staff led by CEO Yutaka Ikeda, who is currently a project manager at Dentsu's business incubation office.

Consultancy created from client inquiries
Dentsu Marketing East Asia will provide marketing support services such as planning and managing business and sales strategies for Japanese advertisers.

"Almost all the major Japanese corporations have already established a presence in China in some way," said Shusaku Kannan, senior manager of Dentsu's corporate communications division in Tokyo.

Already the world's third-largest economy, China is inching closer to overtaking Japan in the No. 2 spot. Japan's GDP in 2009 was about $5.1 trillion.

China said in January 2010 that its domestic output last year totaled $4.9 trillion.

With Japan mired in a crippling recession, China has become just as important a growth opportunity for Japanese companies as it is for many struggling American and European businesses.

Even so, Mr. Kannan said, some large Japanese corporations are still just "planning to enter the Chinese market for the first time [that] we can help expand in China."

For "strategic and confidentiality" reasons, he declined to disclose which companies Dentsu might approach.

The division will operate as a consultancy rather than a full-service ad agency, an idea that came about, according to Dentsu, because its client services teams have seen a rapid increase in the number of inquiries and consultations related to marketing issues in China that go beyond advertising.

So the new division will also advise in areas like procurement, production, distribution and sales. It will even help Japanese firms formulate business plans to expand in China.

Dentsu targets companies new to China
Dentsu already has a significant presence in China, with agencies in Beijing, Shanghai and Guangzhou. But those offices work with the local subsidiaries of Japanese corporations such as Toyota Motor Corp. and Canon, which have already established a presence in China as well as marketing services for Chinese advertisers.

Dentsu Marketing East Asia, meanwhile, will work with the domestic divisions of Japanese corporations that don't have a sizable operation in the mainland.

"We are not saying that there will be no overlap whatsoever," Mr. Kannan said, but "the primary reason for establishing a separate company was to facilitate the prompt development and expansion of China marketing strategies and sales strategy business models."

The new company's first priority is the Chinese market, but Dentsu plans to expand its field of operations to other countries in Asia.

Dentsu Marketing East Asia is the Japanese ad giant's latest effort to expand outside its home market, increasingly through services beyond creative advertising services.

In January 2010, for instance, Dentsu Holdings USA acquired New York-based Innovation Interactive, which owns digital agency 360i, search firm Search Ignite and analytics and targeting practice Net Mining.

The same month, it partnered with Los Angeles-based JAKKS Pacific to produce animated content. Last year, it opened a dedicated sports marketing unit in the U.S., expanding its already sizable sports-marketing operations globally.

Return to the Ad Age China home page.

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