Dubbed one of the network’s “lighthouse” creativity centers, the Interpublic Group of Cos. agency has maintained strong client relationships with marketers like Unilever and Johnson & Johnson and produced award-winning creative on occasion in the past few years.
But internally, the agency has become a textbook example of bad joint ventures, leading to years of management turnover, political squabbles and stalled performance in China, a growing economic power and consumer market.
“The problem was day-to-day interference and meddling,” said one of the agency’s former directors in China. Local partners, such as Jason Shen, Lowe‘s China chairman, and Tiger Fu, its deputy general manager, “wanted to have a hand in everything, such as hiring and firing of staff. They would undermine Lowe’s management at every opportunity.
“There’s a Chinese saying that you can’t have two tigers on one mountain, whether local or Chinese, but the situation was exacerbated by different working philosophies, particularly since the local partner, Guangming, was a government propaganda holdover and Jason was a tough old character who survived China’s Cultural Revolution. He could not be bullied by Interpublic, and especially Lowe,” he recalled.
Since the appointment of Steve Gatfield as Lowe’s global CEO earlier this year, the agency has taken steps to get a fresh start in China, a market Mr. Gatfield knows well from an earlier role running Leo Burnett in Asia/Pacific from Hong Kong.
Most importantly, Lowe has nearly severed ties with Guangming, a Chinese conglomerate that is also the China JV partner of Interpublic’s McCann Erickson. Although foreign firms can legally apply for the right to operate wholly-owned subsidiaries in China, because of regulations in China's agreement with the World Trade Organization that went into effect earlier this year, Lowe is not officially dissolving its partnership.
However, the two parties will no longer operate as one business. Guangming will continue to handle the joint venture’s local clients while Lowe will take sole charge of its multinational business, namely advertising for Johnson’s baby products and Unilever brands like Omo detergent and Zhong Hua toothpaste.
Lowe is also moving to separate office premises in Shanghai after Ms. Lun assumes her new position on September 15. Although she holds a new title at Lowe in China, she is essentially succeeding Tim Hennessy, previously Lowe's managing director, China in Shanghai. Mr. Hennessy relocated to Warsaw late last year as Lowe's regional director, central & eastern Europe, Russia & Turkey.
“There will be a change in the JV situation. The two sides will effectively part company, as local Chinese accounts and multinational accounts have different needs,” said Ms. Lun.
The Hong Kong native’s appointment is another major step forward for Lowe in China. Previously, she was general manager and executive creative director, China for Havas-owned Arnold Worldwide. She has also worked for Leo Burnett, McCann Erickson and Euro RSCG and has won awards at festivals including the Cannes Lions International Advertising Festival. (See Player Profile: Kitty Lun, AdAgeChina, December 13, 2005)
Despite Arnold’s limited global resources, its Shanghai office carved out a niche position under her leadership as a solid creative shop that works with marketers willing to invest in creativity like Estee Lauder, Hennessy and PepsiCo (7-Up).
Ms. Lun, who has spent over 25 years in North Asia and the last nine in China, said Lowe’s creative reputation made the network's offer “very interesting,” but industry observers suggest she is well-positioned to help the agency in China.
“To find someone with her creative stature and long term China experience is great for Lowe. She’s creatively true to what Lowe is about and she’s also a very nice person to work with, which Lowe needs as well, so hiring her is a smart call. It will be great to see them back on track in China,” said one Shanghai-based ad agency director.
Although Ms. Lun jokingly refers to herself a "double minority, as a female creative from Asia," her ethnic background, skills, experience and friendly nature could smooth over the tension between Lowe and its local partners, while also raising its creative reputation.
“What I’m entering is a different situation than that faced by Lowe CEOs in China before me. I will be reporting to Steve Gatfield,” said Ms. Lun. Unlike her predecessors, she won't have to negotiate with Guangming officials about day-to-day staffing, financial and operating decisions. “Also, I’m going in with a clean slate, and I know Jason Shen very well. Being old friends with him gives me a bit of leverage.
“But I’m still nervous about how to rebuild and deal with challenges on hand, not so much the political side, I think that will work itself out, but rather in the quality of the work, building the business and attracting more business that can help our creative reputation,” said Ms. Lun.
“I’m very encouraged. When I was at Arnold, we were struggling to become a strong network, because there were no big global accounts, whereas at Lowe, I know I will have the support of people in New York, London and Bangkok, where Lowe has strong offices. The ability to network is very attractive to me.”
However, Lowe is going through changes in London these days as well. In another top hire, that office just appointed a new CEO, Amanda Walsh, in the hope that she can provide the leadership and focus to get the agency back on track. She was previously European CEO of WPP Group's Red Cell and then its most recent incarnation, United.
Like in China, Lowe London has had an extremely troubled couple of years. At the end of 2005, CEO Garry Lace was suspended while “under investigation” for allegations that still remain a mystery. Mr. Lace formally left the agency this summer.
In March, its biggest client, U.K. supermarket chain Tesco, left to follow the Lowe network's original founder, Frank Lowe, to his new London startup, The Red Brick Road. Mr. Lowe also coveted Lowe’s respected London-based executive creative director, Ed Morris, but the agency managed to hang on to him.
Contributing: Emma Hall in London
SHANGHAI--Yahoo! has appointed WE Marketing Group to handle its integrated brand communications and creative services in China following a four-way pitch. The assignment includes corporate brand communications as well as marketing communications and creative services for its products. There was no incumbent. Yahoo!'s advertising in China has previously been handled by a variety of agencies on a project basis.
SHANGHAI--The Chinese multimedia out-of-home giant Focus Media has completed its acquisition of Appreciate Capital Limited (ACL), announced last month. Under its contracts with movie theaters, ACL has the right to three minutes of screen time prior to the screening of each movie shown in the theater, and those time slots are sold to advertisers. ACL's assets will be recast as Focus Media's "movie theater network," which covers more than 120 movie theaters throughout China, representing about 85% of theater ticket revenue.