Daiko Advertising Inc.

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Daiko Advertising Inc.

Nakanoshima Central Tower
2-2-7 Nakanoshima
Kita-ku
Osaka, 530-8263
Japan
Telephone: +81-6-7174-8111
Fax: +81-6-7174-8004
Web site: http://www.daiko.co.jp/en/index.html

Wholly Owned Subsidiary of Hakuhodo DY
Incorporated: 1944
Employees: 1,500
Sales: ¥81.03 billion ($1.52 billion) (2005)
NAIC: 541810 Advertising Agencies

Daiko Advertising Inc. is one of Japan's leading advertising agencies, and the largest agency targeting the western Japan market. Since 2003, Daiko also has formed part of Hakuhodo DY, Japan's second largest advertising group, behind market leader Dentsu. Like the other members of Hakuhodo DY, Daiko maintains independent operations, and boasts a number of prominent clients. The company's campaigns include television advertising for Matsushita Electric Industrial Co., the QP food group, Teijin, Suntory, Okinawa Meiji Milk Products, and Nintendo; newspaper campaigns for Asahi Broadcasting, Kubota, Matsushita, and Japan Post; magazine and poster work for Matsushita, Ezaki Glico, and Suntory; and web site advertising work for Nike Japan, among others. In addition to its advertising operations, Daiko provides a full-service offering, including public relations and promotional and event planning services. Daiko's focus remains primarily on the Japanese market; the company has established an international presence, however, targeting the Hong Kong and mainland Chinese markets. In 2006, the company established a new subsidiary in Vietnam, as well as its first wholly owned subsidiary in China, where it previously operated through a joint venture set up in 1995. Since 2000, Daiko has been involved in a partnership with The Interpublic Group of Companies and its Lowe & Partners Worldwide unit, giving Daiko access to some 82 countries worldwide. As part of the Hakuhodo DY, Daiko spun off its media buying operations into a new company, Hakuhodo DY Media Partners Inc., which became Hakuhodo DY's fourth major subsidiary. In 2006, the four companies joined together to form Hakuhodo DY Group i-Business Center, which focuses on advertising and related operations for the digital media market. Hideki Nakao is Daiko's president, and Chairman Takashi Adachi also serves as Hakuhodo DY's vice-chairman. In 2005, Daiko posted total billings of ¥181 billion ($1.5 billion).

JAPANESE ADVERTISING PIONEER IN 1944

Daiko Advertising originated in 1944 when a group of 14 advertising agencies in the Kinki region of western Japan joined together to form Kinki Advertising Corporation. A core member of the group was Kinsuido, however, by then one of the most well-known advertising agencies in the region, established around the dawn of the 20th century, and Daiko itself dated its establishment back to 1893. The Japanese advertising industry of the post-World War II period remained relatively small, however; radio broadcasts had begun only in 1925, and the country saw little development in Western-style marketing techniques. Into the 1950s, Kinki limited itself in large part to the print advertising markets, which included purchasing space and placing advertisements in the region's magazines and newspapers.

The introduction of Western-style advertising and marketing techniques in Japan coincided with the launch of television broadcasting in the country, and opened new markets for the country's advertising agencies. While the Japanese government established two public-sector broadcast networks, private sector television networks were in large part owned by the country's print media groups. These in turn often controlled or held major stakes in advertising agencies, which had been responsible for the media group's magazine and newspaper advertising needs. The Kinki company, which adopted the new name of Daiko Advertising in 1960, also followed this pattern, boasting Asahi Shimbun as a major shareholder. That company also controlled Asahi National Broadcasting, the flagship of the Asahi Television Network. Backed by Japan's leading quality newspaper, Daiko emerged as one of the country's leading advertising groups, and became especially prominent in its core Kinki region. Daiko's headquarters remained in Osaka, the major city of the region, but the company also later established headquarters in Tokyo. Another major shareholder for the group was Kinki Nippon Tetsudo, part of the Kinki Group of some 160 companies.

In the early 1960s a new trend developed among Japanese advertising companies. The growing success of Japan's products, and later its brand names, on the international market, opened opportunities for the country's advertising companies to follow their major clients overseas. Rather than establishing their own global networks, however, advertising agencies turned to partnerships with major foreign advertising groups. At the same time, the foreign partnerships enabled the Japanese groups to gain experience working with Western firms entering the Japanese market. In 1960, for example, fast-growing rival and future partner Hakuhodo founded an alliance with McCann-Erickson Worldwide in 1960. That company later became a core member of the The Interpublic Group of Companies, a future shareholder in Daiko. In the meantime, Daiko launched its own international partnership, forming the Grey Daiko agency, in partnership with Grey International Inc. in 1963. This partnership signed up a number of important accounts, including Bristol Myers, Procter & Gamble, Wrigley, Lion, and in the early 1990s, Dell Computer. Like many relationships in the Japanese advertising industry, these partnerships tended to be extremely long-lasting. In Daiko Grey's case, the two founding companies remained partners until Daiko's exit in 1999.

Daiko expanded beyond its core Osaka base during the 1970s and 1980s. The company eventually grew to include offices in most of the country's major markets, including Osaka, Tokyo, Nagoya, Hokkaido, Sendai, and Niigata, supported by a network of branch offices and affiliated companies throughout Japan. By the late 1980s, Daiko had succeeded in capturing the number four position, with billings reported at more than $1.1 billion in 1988. Yet the company continued to trail far behind the clear market leader, Dentsu, and the number two in the market, Hakuhodo.

COMPANY PERSPECTIVES

Philosophy: As the market environment undergoes massive changes in the 21st century, methods of communication become increasingly important.

Our mission is to generate communications that create corporate and brand value by speaking directly to the hearts and minds of consumers.

Our core belief is that ideas are the bridges between a brand and its consumers. Communications solely focused on "effectiveness" and "efficiency" cannot inspire corporate or brand value: success only comes from exciting ideas that attract attention of consumers, which are drawn from every marketing channel.

Enthused with the bedrock belief that ideas bring success to clients and value to consumers, every member of Daiko is dedicated to the fashioning of creative ideas.

PARTNERSHIP FOR MARKET SHARE IN THE NEW CENTURY

Daiko remained focused on the domestic market into the 1990s. In this way, the company remained within the trend of the highly conservative Japanese advertising industry, which in large part avoided direct expansion into international markets. Nonetheless, the rapid consolidation of the global advertising industry, itself spurred by the development of large-scale, multinational giants in nearly every industry, encouraged Daiko to take its first steps internationally in the 1990s. The company's interests remained more or less limited to the Chinese market, however, where it established a Hong Kong office. In 1995, the company opened an office in Beijing as well, as part of a joint venture in keeping with Chinese rules that prevented foreign advertising agencies from opening wholly owned subsidiaries in that country. Daiko's international operations primarily provided support for its Japanese clients' own expansion into Hong Kong and mainland China.

In 1999, Daiko announced that it was pulling out of the Grey Daiko partnership, selling its nearly 41 percent in that agency in order to find a new international partner. Daiko's opportunity came later that year, when Kinki Nippon Tetsudo decided to sell off as much as 25 percent of its stake in Daiko. Interpublic, through its Lowes subsidiary, quickly stepped up, buying nearly 20 percent of Daiko. Interpublic and Daiko formalized their business alliance in 2000.

By then, however, Daiko had slipped in the ranks of Japan's largest advertising groups, back to fourth position. In the meantime, leader Dentsu had increased its dominance of the Japanese market, far outpacing number two Hakuhodo. At the same time, with the spate of mega-mergers among the global advertising industry at the end of the 20th century, both companies had plummeted in the international rankings. In Daiko's case, the company barely remained in the global top 20, holding on to 19th place.

In response, Hakuhodo, Daiko, and a third company, Yomiko Advertising, ranked number eight in Japan, announced their plans to join together at the end of 2002. By October of the following year, the three companies had integrated their management into a new holding company, Hakuhodo DY, which became the umbrella organization, while the three agencies retained their independent operations. The new company now had nearly caught up to market leader Dentsu, with ¥985 billion in revenues, versus Dentsu's nearly ¥1.4 trillion.

The integration of Hakuhodo continued into 2005, when the three companies spun off their media buying operations into a fourth company, Hakuhodo DY Media Partners Inc. In February 2005, Hakuhodo DY went public, listing on the Tokyo Stock Exchange. By February 2006, the partnership had found a new area of integration, when the four Hakuhodo DY companies joined together to found a new subsidiary, Hakuhodo DY Group i-Business Center. This operation specialized in developing advertising products specifically for the fast-growing digital media market. Hakuhodo DY also acknowledged its intention to continue the integration of its major subsidiaries, with the possibility of creating a single unified structure in the future.

Daiko remained on the lookout for growth opportunities, with a heightened interest in expanding its presence in the Asian market. In April 2006, the company set up a new subsidiary in Ho Chi Minh City, Vietnam. In this way, the company was able to provide support for Japanese companies entering the Vietnamese market. In the meantime, the Chinese government had relaxed its rule governing agency ownership. This allowed Daiko to establish its first wholly owned subsidiary in China, with a first office opened in Beijing. The company also planned to open a second subsidiary, in Guangzhou, by the end of April. As part of one of Japan's top advertising groups, Daiko remained one of the market's oldest and leading players.

KEY DATES

1893:: The earliest part of Daiko Advertising is founded.
1944:: Fourteen companies merge to form Kinki Advertising Corporation in Osaka.
1960:: The company changes its name to Daiko Advertising.
1963:: The Grey Daiko joint venture is formed with Grey International.
1995:: A joint venture in Beijing is opened.
1999:: The company exits the Grey Daiko joint venture.
2000:: Interpublic acquires 20 percent of Daiko.
2002:: Daiko, Hakuhodo, and Yomiko combine management.
2003:: Hakuhodo DY is founded; Daiko remains an independent subsidiary.
2005:: The company spins off its media business into Hakuhodo DY Media Partners Inc.
2006:: The company joins in the creation of Hakuhodo DY Group i-Business Center; Vietnam subsidiary and wholly owned subsidiaries in Beijing and Guanzhou, China, are launched.

PRINCIPAL SUBSIDIARIES

Ad Daiko Nagoya Inc.; Advertising Daiko Gifu Inc.; Asahi Area Advertising Inc.; Chubu Asahi Advertising Inc.; Daiko Communications Asia Co., Ltd.; Daiko Hokuriku Advertising Inc.; Daiko Kobe Inc.; Daiko Kyoto Inc.; Daiko Kyusyu Advertising Inc.; Daiko Mie Inc.; Daiko Pacific International Advertising Co., Ltd. (China); Daiko West Inc.; Kinki Koukokusha Co., Ltd.; Shanghai Daiko Maocu Advertising Co., Ltd. (China); Shanghai Daiko Maocu Advertising Co., Ltd. Guangzhou Branch (China); Taiyo Seimei Kagoshima Daini Bldg.

PRINCIPAL COMPETITORS

Sony Corporation; Odakyu Electric Railway Company Ltd.; Asatsu-DK Inc.; Dentsu Tec Inc.; DENTSU Inc.; Cyber Communications Inc.; Seven Seas Holdings Company Ltd.; Shinken-AD Company Ltd.; Tokyo Electron Agency Ltd.; Catalina Marketing Japan K.K.; Nippon Oil Trading Corporation.