When I arrive at Hakuhodo’s Granpark Tower offices in Tokyo, five
minutes before my scheduled interview with the chairman of the board,
Takashi Shoji, Bob Hasegawa, the agency’s international business
director, is flapping around in reception, mobile phone in hand.
’I was just calling London to see what had happened to you,’ he
Lesson number one - five minutes early is late, 15 minutes early would
have been on time. This frosty welcome sets the tone for what proves to
be the most formal and guarded of all my Japanese interviews.
Once Hasegawa has gathered himself together, I’m led into an office by
two of the agency’s corporate PR staff - who perch, quite literally, on
the edge of their seats and scribble notes for the entire two-hour
duration of the interview.
I am told where to sit and we all wait for Shoji - me with an increasing
sense of foreboding as I recall all the warnings from Hakuhodo’s London
office: ’Don’t cross your legs, it’s very disrespectful. Don’t touch
your nose, it’s very rude, and when you’re handed a business card,
accept it with both hands and stare at it intently as a mark of
Shoji enters the room a couple of minutes later, impeccably dressed and
to a standing ovation. He has the honour of being the only person in
Japanese advertising history to have switched from a creative role to
corporate presidency - not uncommon in the West, but unprecedented in
Anyone with an interest in the Japanese advertising market will be
keeping a keen, if not a sceptical, eye on Hakuhodo. As they move into
the 21st century, Japanese advertising agencies are facing a dilemma -
whether to try to survive with the help of a foreign group or to rapidly
re-structure in order to increase their own capacities.
Since 1895, Hakuhodo has grown to become Japan’s number two in terms of
billings and the agency with the highest creative profile. It has 4,000
employees working out of 54 offices in 17 countries but faces being
relegated to third place in Japan following the Asatsu/WPP deal.
While Dentsu and Asatsu have staked their respective claims to global
expansion, Hakuhodo has remained committed to going it alone. There has
been no hint from the management that it has any intention of forming an
equity relationship with a Western group. It’s a stance that will prove
to be either very brave or suicidal, given the economic situation in
It is clear that, by 2003, Hakuhodo will go public, but what is less
clear is what Shoji intends to do with the capital the flotation will
release and how the agency will handle the increased media transparency
that will result.
’Our main objective is to expand overseas, setting up new offices or
buying other agencies, and we are trying to time that with the speed of
expansion of Japanese clients overseas,’ Shoji says. ’Across Asia, we
see that as being five years from now and globally in ten years.
’The top multinational agencies have about 30 clients that have a
presence in about 30 countries. Hakuhodo has no Japanese client that
could be described this way, but in ten years’ time we hope to have
about ten to 20 that would have that kind of global presence.’
When I ask Shoji how the agency expects to deal with the increased level
of transparency following the flotation, he dismisses the issue as one
that is mostly raised by Western clients in Japan.
’Japanese clients have not addressed that issue yet but we know we are
going to be facing it in the near future. Maybe the media side of the
business isn’t transparent but that doesn’t mean we’re making more money
than Western agencies.’
By Shoji’s own admission, very few of Hakuhodo’s management team have
overseas experience - about 10 per cent - his reason being that only
about 10 per cent of billings come from overseas work, the rest is from
the domestic side.
The performance of the London office has been poor - launched just over
ten years ago and now with not a single member of the original team.
Shoji wants to see an even 50/50 split between Japanese and local
business in London, but admits that, at the moment, local business is
The office is run by Ruoichi Katsui, the managing director, who speaks
little more than the bare essentials of English. He needs a translator
to enable him to communicate with the agency’s second-in-command, Anne
Green, the client services director.
I ask Shoji how he can hope to make an impact on the London market when
the key staff are unable even to talk to each other without making an
appointment with a translator.
’The ability to succeed rests more on the ability of the management and
language is not the primary consideration. In Japan, we have many
Western agencies whose managing directors are not able to speak any
’A better way may be to invest in a local agency that has local clients
already - to establish a larger profile in the UK might take more time,’
Is Shoji worried that Hakuhodo will be left behind in the race for
’No, and I’m not sure how well BDM will do in terms of Japanese
clients,’ he replies. ’Dentsu/Y&R didn’t turn out the way Dentsu
expected it would.’
Originally, Hakuhodo had marked out the US as a priority for expansion,
but the agency has effectively given up trying to crack that market. Its
list of priorities now runs from Asia, then the UK, followed by Europe
then the States.
’At the moment, Japanese clients are using American agencies very well
and I don’t see the opportunity is there to take those clients away from
them, but in Asia, Hakuhodo has a potential over Western agencies.
Although it’s going to take more time, we think it’s better to take a
more independent approach to globalisation - that will not be through
mega mergers but by a more piecemeal approach,’ Shoji explains.
It is by these means that, by 2004, Shoji intends Hakuhodo to become one
of the world’s top ten major global advertising agencies - now it lies
at 13th - while resisting the advances of the advertising industry’s
giants including Interpublic Group, Publicis and Omnicom.
He insists that the single factor preventing any deal is client
conflict, but the agency’s two biggest rivals have managed to reach
deals that preclude any such worries - so why not Hakuhodo?
Would he consider re-establishing Hakuhodo’s links with McCann-Erickson
perhaps? The agencies came together in 1960 to form McCann-Erickson
Hakuhodo, which was focused on Japan. Hakuhodo sold its 49 per cent
equity stake to McCann in 1994. Any renewal of the alliance sounds
’In my mind, the deal was relatively successful in Japan but the primary
objectives of both agencies were not really the same,’ Shoji says.
’McCann-Erickson was looking for a way to broaden its base in Japan and
Hakuhodo wanted to draw from the latest in advertising know-how.’
It is difficult to be convinced by anything Shoji is saying when, after
nearly every question, he appears to be taking advice from the others in
the room. He doesn’t have the demeanour of a man who speaks freely.
Much of Shoji’s personality is lost through the translation and there is
little room for the more informal discussion that often supplies the
most telling insights. He provides very bland answers to the more
personal questions I ask him.
What does he enjoy most about the industry? ’Connecting the client’s
product with the consumer.’ What upsets or irritates him about the
’Nothing.’ What or who is his inspiration? ’Agencies like DDB Needham
and Ogilvy & Mather because they’ve made such a huge impact on the
The closest you can hope to get to this man is to study his CV. After
graduating from Tama Art University, he joined Hakuhodo in 1963 and, as
you would expect, he’s been there ever since.
He made the switch from creative to management in 1976, when he became
the general manager of the fourth advertising group. Hakuhodo has seven
groups altogether, which act as autonomous agencies, enabling it to
handle conflicting business.
From then on, he moved steadily through the ranks, becoming the director
in charge of account service in 1981, the senior managing director in
1989 and then the vice-president in 1991.
For most of the past decade, Shoji has had to deal with a depressed
economy, which has forced some companies to become more export led,
while domestic consumption has been low.
At the time of writing, foreign investment is running at an annualised
rate of about dollars 125 billion, three times the rate of 1998. The
huge uptake of overseas investment has put 15 per cent of the Tokyo
stock exchange’s dollars 3.7 trillion market capitalisation into foreign
hands - this compares with 5 per cent a decade ago and surpasses the
holdings of Japanese banks.
Hakuhodo therefore needs to respond to a climate in which clients are
taking a close look at their agency relationships and how much they are
spending. What are Shoji’s intentions? ’Western clients have always
looked at their agencies as partners when they expand overseas but
Japanese clients traditionally hired locally. They thought their
technical ability and marketing know-how were the only important factors
on entering a foreign market but they have begun to see the importance
of brand strategy in the way Western clients have done for years.’
Hakuhodo’s single largest account, the car maker, Nissan - Japan’s third
largest global spender after Toyota and Sony - recently decided it
required a single global agency partner to handle its dollars 600
million account. Shoji was keen to respond and Hakuhodo is now
undertaking a joint venture devoted solely to Nissan with another of
Nissan’s roster agencies, TBWA Worldwide.
Hakuhodo handles virtually all of Nissan’s domestic business, which now
represents more than 10 per cent of its billings. Hakuhodo’s
relationships with its clients have been described as ’not
inter-breeding, but not far off’ and any threat to its hold on the
Nissan business would be cause for serious concern.
The tie up with TBWA could prove to Shoji that such alliances - which
are often as defensive as they are aggressive - are not only necessary
Despite that fact, he remains adamant that Hakuhodo is capable of
becoming a top ten global agency and one that will handle upwards of 20
global clients without such a move.
His assumption that Japanese clients will continue to look to their own
before turning abroad is difficult to support. Add to that the poor
performance in London and suddenly Shoji’s ’piecemeal’ approach to
expansion looks very unconvincing.
Next week: Asatsu’s chairman and chief executive, Masao Inagaki.