Print Published 8th Oct 2017, 17:53

Asatsu-DK takes tighter control of its global ambitions

The recent shenanigans about whether or not WPP can be compelled to sell its substantial minority shareholding in the third biggest Japanese marketing group Asatsu-DK (ADK) is a mere sideshow by comparison with the underlying issue involved, namely how ADK can take full control of delivering its global strategy (see WPP questions validity of ADK termination notice).

For decades Japanese agencies have sought to deliver a global service to their domestic clients by forming alliances with local agencies abroad.  Dentsu was particularly active in doing so, but one after another the deals unravelled.  Hakuhodo has also established partnerships abroad (see Here Comes Hungry Hakuhodo!).

After a succession of relationships with UK agencies – from CDP to Travis Sully – Dentsu acquired a 21% stake in the Leo Burnett and MacManus networks to form BCom3 in 2000.  But any hope of achieving a lasting global alliance was thwarted when Publicis Groupe bought control of BCom3.  Dentsu’s solution was to buy Aegis Group and thereby take outright control of its international business – led by Jerry Buhlmann in London within a strategic framework determined in Tokyo.  (Since then Publicis has established a local Japanese subsidiary Beacon Communications as a conduit for all its global brands there.)

ADK seems to have arrived at a similar conclusion to Dentsu: if it is to compete effectively in global markets, it must take control of its delivery network and its production resource.   No longer will it be content with alliances that impose development constraints as a quid pro quo for local delivery.  No longer will it subject itself to the delays in “business innovation and structural reform” that it claims were exacerbated by its alliance with WPP (see WPP tie-up “caused delays” to ADK’s innovations and reforms).

“The company needs to have greater flexibility to pursue its mid-to-long-term management strategy”, ADK says, unconstrained by a “misalignment between the company and WPP with regards to the business model and investment areas”. ADK believes it must be able to work with partners outside WPP, and operate a more open and fair selection process in order to form the most value-enhancing partnerships possible.  That should ring alarm bells among those involved in WPP’s Japanese digital alliances where ADK is currently a partner.

With the backing of Bain Capital, there must be a strong possibility that ADK will seek to emulate Dentsu by acquiring a significant player in the Western marketplace.  Among those candidates must be The Interpublic Group and doubtless there will be others on Bain’s hit list.

Meanwhile WPP may face a massive challenge to retain and expand its own presence in the Japanese market.