Ogilvy & Mather return to Japan

by David Kilburn

Ogilvy & Mather is hoping the third time is the charm in Japan. On April 4 [1995], Rod Wright, chairman Asia/Pacific, formally opened O&M's third agency start-up in Tokyo. The new agency, called Ogilvy & Mather Japan, has six clients: Alitalia, IBM, Kodak Digital Imaging, the Westin and Meridien hotel chains, and Wilson Sporting Goods. Billings of at least 2.5 billion yen are forecast for the agency's first year.

In 1983, Ogilvy tried a joint venture with Tokyu Agency International. The agency lasted a mere 18 months before the partners found they had different goals and closed it. A wholly owned subsidiary, Ogivly & Mather Japan, followed. This shop affiliated with I&S Corp., which provided media and creative services. It successfully attracted business from AT&T, Philips, Cotton Council International, Guinness and the British Tourist Authority. But it lost money and was closed in 1988. At that time, Ogilvy was trying to improve its earnings to thwart takeover attempts. Thereafter, Ogilvy explored several avenues to return to Japan, including setting up a direct response company, before concluding that a wholly owned advertising agency remained its best bet.

One problem in the '80s was that many clients were not yet thinking globally. "In the mid-'80s, none of our clients really needed us here," says Wright. "Today, they actually do want us here because they are running their brands on a worldwide basis. They want a consistency of management and knowledge across the network. They want our involvement even if we don't reach a point where we can do all the necessary activities on the ground in Tokyo. Our clients are asking us to develop a capability to actively participate in managing their brands in Japan. We've already begun doing work for American Express, Seagram and The Economist in Japan."

Despite Japan's recession and the record-high value of the yen, which makes investment costly in dollar terms, Wright believes that Ogilvy now has both opportunities and needs that give the new venture a better chance of success than earlier forays. "We believe the situation today is very different from the time of our previous attempts to enter Japan. Three things in particular are different from those earlier occasions," he says. "One is that today we have a range of worldwide brands and clients who want us to help manage those brands. IBM is one of them. American Express is integrating its approach and is using different parts of our Asia/Pacific network to support the whole--for us to have a base in Tokyo is critical to that. Tokyo is a key center for work on some of Unilever's brands regionally. We also have opportunities with a number of other multinational clients."

Another argument for a presence in Japan is that it will help O&M pursue new accounts. "The second factor is that we found we were being eliminated from a number of new business opportunities in the Asia/Pacific region because we had a hole in our network in Japan," Wright adds. "Over 1992-93 we estimate that we missed out on new business worth about $50 million because we did not have a credible presence in Tokyo." Wright cites Disney as an example.

Ogilvy also found that new business around the globe was hard to get from Japanese companies without a Tokyo base. "The third factor is that the number of Japanese brands we handle internationally is small. One of the major new business opportunities that could help us grow around the world is with Japanese brands. Until we can develop a quality operation in Japan and demonstrate a strong understanding of Japanese companies and Japanese brands in their domestic market, it will be very difficult to be credible in working for those brands internationally," says Wright.

In comparison, after 35 years, McCann-Erickson, the most successful international agency in Japan, has assignments in Japan from 119 Japanese firms and services many of those clients in a number of other countries.

Wright is optimistic that the new agency can break even at the end of 1996, provided existing client relationships can be translated into business.

Philip Goodstein, president of the new agency, who came to Japan in 1993 to start preparations, says that the agency, like the parent company, will focus on brand enhancement through Ogilvy & Mather's "brand stewardship" initiative, a proprietary process of tools and techniques used to focus all agency resources on brands.