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 insights into how Japanese management styles can turn an opportunity into a crisis and into the problems managers in many privately owned agencies face 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 hope was that by tapping into the resources of a major Japanese agency, the tiny Publicis shop in Tokyo might evolve into something with enough credibility to win substantial business from their main international clients, L'Oreal, Nestlé, and Renault. Kimio Arai, Tokyu's president, was keen to internationalize his very domestically focussed agency, access some modern agency 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 wholly owned by Tokyu Corporation, a Tokyo-based conglomerate that runs a private railway company and owns construction companies, hotels, an airlines, department stores, supermarkets, and golf courses. 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 house agency, but it does count both Nestlé and Toyota among its clients.

Arai's persistent attempts to sell the concept of building a more modern agency through an international, equity-based partnership ultimately proved so irritating to Tokyu's owners that this July he was replaced as president/CEO by one of the parent company's top executives, Hisashi Nagatoshi. Encouragingly he voiced commitment to Arai's goals but with no prior experience of running an advertising agency found it difficult to see how a joint venture with Publicis, or indeed anyone, might be a step forward. And so the talks came to and end. Additionally, since Tokyu Corp had earlier vetoed the idea of selling equity in their 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 either by railways, retailers, media companies, or families. While agency managements often perceive the need for change, owners more than often do not. Until a couple of years ago, little had changed in Japan's domestic ad industry when compared with the UK or USA. 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 (-4% Jan-June) and margins squeezed, the pressures on old-fashioned agencies may yet squeeze some out of existence before the rest get on the right tracks.