Modern Taiwan is pre-occupied with making money rather than dreams about the mainland. Over half the population are under 3O. With their lives built around a prospering island economy, neither re-conquest, nor re-union with China are high on the agenda. For only 5 of the last 1OO years has Taiwan shared a government with mainland China. Despite the evident cultural links, there is little common history. The mercantile values of a tiny trading nation prevail over the fading dreams of the elderly men who lost the mainland to Mao Tse Tung.

The Nationalist government is shedding its siege mentality and allowing things to loosen up. Martial law was lifted in 1987. The same year the opposition Democratic Progressive party was allowed to become a legal entity. Limited elections are due this December but the Nationalist Party is in no danger of losing control.

The Nationalist government is also selling shares in some of its business interests. It owns over half the total assets of Taiwanese companies, worth about NT$1O Trillion (about £25O Billion). It also holds over 7O% of the land, and controls all the banks.

Despite these moves no-one expects the Nationalists to weaken their 4O year grip on the island. The 2O million residents will however get more of a share and a tiny voice in how things are run. There is pressure for change, but not for dramatic change. The legitimacy of government rests on rising living standards, strengthening economy, and a burgeoning private sector. Pragmatic facts such as these are more important to most than democratic ideas which have only a short history in the Orient.

Liberalisation has created opportunities for markets to grow. International advertising agencies and their clients are busy realising the potential.

Advertising itself is growing quickly. Spending hit NT$ 3O Billion (about £75O million) in 1988, 5O% up on 1987. By the end of 1989 it should be close to NT$ 4O Billion (about £1 Billion), but only about half this goes through agencies. Union Advertising, the largest billed NT$ 48 million in 1988 followed neck and neck by Ogilvy & Mather and McCann Erickson, each billing about half that amount.

Agency newcomers in the last few years include JWT, Saatchi, HDM, Lintas, DDB Needham, BBDO, The Ball Partnership and, from Japan, Hakuhodo and the Tokyu Agency. All can point to healthy growth and important clients. However early starters McCann Erickson and Ogilvy & Mather are easily the most successful foreign agencies. McCann’s growth, averaging 43% a year for seven years makes it the island’s hottest agency.

The pace setting budgets are those of international marketers. Nestle, Matsushita Electric, and Kao Corp. are all prominent in the top ten advertisers. Coca Cola, Unilever, Johnson & Johnson, P&G, McDonalds, Kentucky Fried Chicken and many other well multinationals, both Japanese and Western are also big and growing spenders.

"Taiwan is changing rapidly," said Mr. Hiro Oshima, president of McCann Erickson Taiwan, "Five years ago most companies were just production and sales oriented and thought short term. But now marketing disciplines have taken root. Local companies have seen the gains in business that can be achieved from understanding the consumer. Research, planning, merchandising, public relations are all becoming more important."

Taiwan is a testing ground for Western packaged goods marketers to test their mettle against their Japanese counterparts. The competition is toughest between Unilever and Kao, Japan’s leading detergent and personal care product maker. P&G is also an important player but, working through a joint venture, lacks some of its usual toughness.

Unilever bought the Formosa United Industrial Group (FUIC) the leading Taiwan detergent company at the end of 1984. Since 1986, Timotei, Lux toilet soap, Jif, Snuggle, and Omo, have all been launched. FUIC plans to introduce more Unilever brands to the island. They are also taking over marketing Lipton Tea from an agent as a first step to develop food markets. Eventually, this will include frozen foods.

Shampoos are one of most strongly contested markets. Kao holds a 22% volume share of the shampoo market compared with FUIC’s 2O%. Kao’s lead brand is their top seller in Japan, ‘Pure’ shampoo. FUIC’s main weapon is Timotei, also brand leader in Japan.

In Japan, Timotei’s emotive Scandinavian advertising and positioning as a shampoo that offers superior mildness enabled it to overtake Kao’s Pure, to become brand leader. In Taiwan, similar advertising, based on images of blonde Scandinavian girl ran into problems. Black-haired Taiwanese consumers found the blonde hair imagery too way out to relate too. Some wondered if Timotei would turn their hair blonde. The campaign was changed to feature black hair. Perversely, consumers didn’t notice the difference, so the blonde girl was re-introduced. Promotions and merchandising helped get the message across and now Timotei is challenging Kao’s Pure for leadership.

Kao meanwhile has new products up its sleeve to help meet new consumer sensitivities that have evolved with the influx of new brands.

Meanwhile P&G’s shampoo strategy has been to introduce premium priced brands such as Head and Shoulders and Pert, (a 2-in-1 shampoo). While these only account for 12% of market volumes, they have made P&G brand leader in value with a 25% share of the NT$ 2.5 Billion (about £62 million) retail shampoo and conditioner market.

Shampoos are the only market where P&G is a strong player. Detergents are dominated by FUIC with a 6O% share, but Kao is using its successful compact detergent from Japan, Attack, to build a beach head.

"Attack did a very good job. They used a popular TV presenter in their advertising and very quickly got high awareness, " said FUIC’s marketing controller Leendert Goedman.

Research by McCann Erickson, Kao’s main agency shows that Attack has become leading brand in awareness and intention to purchase. Sales are moving in line with the research.

FUIC’s response is a compact version of Omo. If it expands the compact sector this may even help Kao. For the moment at least it seems that a degree of Chinese conservatism may prevent Kao running away with the market, as it did in Japan.

Kao’s approach to Taiwan shows how sophisticated they have become in marketing outside Japan. Shampoos and hair care products have been re-formulated for Taiwanese hair, water, and washing habits. Kao also has hair care salons and an R&D facility to help keep track of consumer needs, product performance and check competition. Later this year Kao will become the first marketer to introduce a telephone hot-line for customers to call the company collect with questions or complaints.

Kao Taiwan’s general manager, Yoichi Hamano, enjoys a degree of autonomy rare among Japanese consumer marketers abroad. While most of Kao’s rivals use or adapt international packs, Kao Taiwan has hired Michael Peters Co. to create new packs uniquely for the Taiwanese market. "Our job is to get things right for Taiwan first and foremost," he says.

Despite their sophistication, both Unilever and Kao have had their flops as well as their successes. Unilever’s Rexona, a deodorant soap failed because the Taiwanese did not feel they had a body odour problem or needed a deodorant soap. Kao found that its fabric conditioners were thought unnecessary.

As foreign marketers move in, Taiwanese investment is spreading out. With the world’s second largest foreign currency reserves of US$ 75.7 Billion, is well able to make strategic investments overseas. It needs to.

The 4O% appreciation of the Taiwan dollar in the last two years threatens the profitable OEM business on which much prosperity has been built. Taiwan’s image as a low cost manufacturing base, lags behind reality. Burdened with cash and starved of growth opportunities in tiny domestic markets, Taiwanese firms are expanding globally. .

There are Taiwan-owned hotels in Hong Kong, banks and petrochemical plants in the USA, toy factories in Thailand, textile makers in Indonesia, furniture plants in the Philippines, shoe makers in China and computer assembly plants in Europe. Union Advertising is planning to open in New York in 199O to help its domestic clients in the US, Europe will be its second overseas base.

To help improve the image, Taiwan’s Board of Foreign trade is allocating a budget of NT$ 6.2 Billion over a five year period to upgrade the Made in Taiwan image around the world. Of the total NT$ 5 Billion will be to help local firms with brand name promotion campaigns overseas. Money will go on promotional and PR activities as well as advertising. Companies such as Acer and Tatung intend to become as well known around the world as Toshiba, Sharp, Sanyo, Sony, NEC, and Compaq.

Computers are Taiwan’s strong suit. This year it will sell over 3 million PC’s and a similar number of ‘motherboards’, which will go into other people’s PC’s around the world. Acer, Taiwan’s leading maker has sales of over £24O million, and runs close behind US makers such as Compaq in utilising the latest in chip technology and design.

The economic miracle has its weak spots. Taiwan is in a hurry for more progress. Most of the young population zip around on scooters with no time to don crash helmets or follow a highway code. Homeless people hold sleep-ins outside government offices to protest rising housing prices. While the streets are safe to walk at night, crime is slowly increasing. Bandits, said to be armed from mainland China, have occasional shoot outs with the law.

Economic success has come so quickly that no-one has had time to clean the streets, let alone repair them. The government and the municipalities are now planning to give the country a modern infra-structure, clean up the water supply and do something about sewage. The untidiness gives civic minded Coca Cola an opportunity to sponsor ‘Clean up Taipei’ events and reinforce its leadership of the soft drink market at the same time.

Meanwhile marketers from East and West are cleaning up in Taiwan while the Taiwanese have similar plans for computers and electronics in the USA and Europe. Taiwan is by no means as formidable a competitor as Japan, but like South Korea it certainly ranks as one of Asia’s aggressive little dragons well able to give the unwary a sharp nip.