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May 23, 2005
Asia Rising
I am just back from a long trip to Asia. I was in Seoul (note my previous blog on OhMyNews), Tokyo and Beijing (at the Fortune CEO Conference). I have several thoughts for your consideration.
1) Pay TV versus Advertising Supported TV in China--This is really a window into a broader debate on the needs of the growing Chinese middle-class who largely live on the East Coast (Shanghai, Beijing, Guangzhou) versus the rights of the entire citizenry, especially those in the rural areas. There is the need for a growing revenue stream (pay TV) to support the creation of made for cable programming (think HBO) and to attract best in class athletes (think Manchester United or New York Yankees) against the designation of television as a social service. A speaker at the Fortune Conference from CCTV suggested putting "non-important events on Pay TV." Michael Wolf of McKinsey took the entirely opposite view, arguing that a migration to Pay TV is inevitable given the global trend. As an example, BSkyB in the UK gets only 8% of its revenue from advertising, the balance of 92% from monthly subscription charge. Stay tuned for the outcome.
2) Team versus Individual--There is a cultural bias in Asia towards team over individual. A study by Octagon, the sports consulting firm, indicates that passion for sport in Asia is driven by love of the game, personal participation in the sport, team devotion and appreciation of skills/technique. In fact Herbert Heiner, CEO of Adidas, noted that as Yao Ming has emerged as a superstar, there may be a new trend towards the individual. For example, 60% of CCTV viewers tuned into the seventh game of NBA Playoff series featuring Houston Rockets versus Dallas Mavericks (Yao plays for Houston). Also there must be better return on investment for sponsors, which for Mr. Heiner comes in part through passion for sport driven by media coverage. The press will focus on individual heroes, which then allows marketers to utilize athletes as spokespeople in advertising. However, this debate is resolved, you have to love the numbers--300 million Chinese play basketball, 15 million people went to NBA.com.cn, which is the Chinese version of the NBA web site, and 60% of Chinese ages 25-44 watch the UK Premier League Football matches.
3) The Emergence of Corporate Social Responsibility--Every one of the major Japanese companies I visited on this trip (Mitsubishi, Nomura, Mizuno, NKK, MTFG, Hitachi, Fujitsu) either has written a CSR report or has a CSR officer. There is concern about supply chain, marketing claims, crisis training and waste treatment. This is somewhat less true in China and Korea, though the Chinese are very focused on the Beijing Olympics as a deadline for environmental improvement projects.
4) Intellectual Property Protection--This is still the key issue for many companies participating in the Chinese market. A quick stroll down the boulevard in Beijing attracts street peddlers who offer DVDs of newly released movies for under $1 (7 yuan). Hu Jintao, leader of China, promised the business leaders at the Fortune Conference that his country would step up protection of intellectual property. Yet the very size of the Chinese market opportunity is forcing companies to have different policies than elsewhere in the world. As one example, GM is allowing its 50% partner in its China business, Shanghai Motor, to launch its own car brand in 2007, ostensibly not competing with GM because it is at the lower price point and allows GM to lower its cost base by amortizing production over a greater number of vehicles.
5) The Size of the Asian Market--According to experts at the Fortune Conference, Asia's share of global GNP will move from 25% in year 2000 to 32% by 2010. Asia will have four of the world's leading economic powers by 2010--Japan as #2, China as #3, Korea as #9 and India as #10. The financial markets of these countries have in many cases not caught up. For example, according to Hank Paulson, CEO of Goldman Sachs, the total value of the Chinese equity market is $400 billion, the Japanese market is $3.4 trillion, the US market is $14.5 trillion. The result is that too many of the Chinese companies rely on bank financing and are not sufficiently exposed to private sector pressures (state owned enterprises that are protected from layoffs by government).
6) Nationalism--The most profound change since my trip in October is the voicing of strong nationalistic feelings in Korea and China towards Japan, which occupied both countries during World War II. The sense is that Japan has not sufficiently atoned for its misdeeds during the war and that it still believes it is superior to its neighbors. While the Japanese feel they have apologized more than 20 times. As columnist Roger Cohen observed in the International Herald Tribune, "History is making a surreal comeback..because years of debate have not resolved how the terrible twins of communism and fascism should be viewed on a scale of evil....the search for truth remains a work in progress." According to the Edelman Trust Barometer, Japanese companies are held in high esteem in 8 of 9 markets, the single exception is China, where Prime Minister Koizumi's government is held in as low esteem as President Bush's administration is in France and Germany. While I'm convinced U.S. business can and is working to build relationships in Europe, I'm not as clear what role, if any, Japanese business has in addressing this specific issue in China and Korea.
I am glad to be back home (my daughter graduates from high school on Friday!!??) and keen to get your feedback on this blog.
Posted by Edelman at May 23, 2005 4:03 PM |
Comments
Richard,
Thanks for the insights on emerging trends throughout the world. As an avid reader of the blog, I find the information both interesting and valuable. I'm at the beginning of my career and enjoy reading your thoughts on the industry. Thanks again!
Posted by: Rebecca Frost at May 26, 2005 1:43 PM
Rebecca,
Thanks for your note
Glad you are a regular reader!
Posted by: Richard Edelman at May 26, 2005 5:18 PM
Dear Mr. Edelman,
It is interesting to hear your views on Nationalism and CSR in Asia.
As a recent Boston University graduate majoring in PR, I was excited to come to Beijing, and with luck, follow my passion for CSR; however, I am sad to say that, from my experience, CSR holds little place in China's business sector.
I have found that the general view of Public Relations in China is very different from that in the States.
I truly hope that with the upcoming Olympics, Chinese corporations will learn the importance of CSR and PR.
I enjoy and appreciate your posts~
Posted by: Cecilia Fan at May 31, 2005 3:11 AM
Richard,
I always enjoying reading your thoughts, and as a fairly new employee to Edelman, I appreciate your insight & the time you take to bring us up to speed on what is going on around the world.
I was curious if you thought the emergence of CSR in Asia was due to companies "following" trends in the market & doing so because it seems to improve their reputation or because they truly understand how it can benefit their bottom line.
Thank you & I look forward to hearing your thoughts.
Also, Congratulations to your daughter- what an exciting time!
Posted by: Katy George at June 3, 2005 10:24 AM
Katy,
Emergence of CSR in Asia is partly a function of increased expectation of companies. Now that Asia is growing quickly again, there is real concern about environment and access to drinking water. China is really focused on improving air quality in Beijing prior to 08 Olympics. Companies must play a part in resolving these issues
Richard
Posted by: Richard Edelman at June 6, 2005 2:13 PM
Cecilia,
Be patient with PR in China. It is coming along, perhaps behind the development of industry, but that is what happened in the US. CSR will have a real role in China.
Richard
Posted by: Richard Edelman at June 6, 2005 2:25 PM
Hi Richard,
I am Chinese from NorthEast China. People there do not really reject Japanese brands/products.
I think Japanese products are popular for many reasons, price, quality, good design and etc.(I am in 4A advertising agency but pardon me for speaking up with no figures.)
Please believe Chinese consumers like to accept any good brands. Yes.
Posted by: JohnsonZC at June 17, 2005 1:15 PM
JohnsonZC,
Very interesting comment. Perhaps the issue is more profound in the cities along the coast or in the capital. I learn continuously from comments to my blog. Keep reading it!
Richard
Posted by: Richard Edelman at June 21, 2005 11:22 AM
Asia may be rising, but its PR savvy is struggling to follow suit.
Unless Haier's PR and communications surrounding its attempted acquisition of Maytag improve dramatically - and quickly - China's business community will get a collective lesson on the value and importance of communications, particularly in a market with a free press. I was interviewed today by two news outlets here in the US - it's clear to me that a series of missteps and poor communication are not serving Haier well. If I were a leader of the union that represents workers in Maytag's plants, I'd be leaning heavily on Sen. Tom Harkin to oppose this sale.
Lenovo's acquisition of IBM's PC business was not important news in the US. Haier's attempt to purchase a brand as iconic as Maytag, and in America's heartland, however, could become big news. Haier could still use this as an opportunity to increase its name and brand recognition in the US; something that would be a strong positive should the rumored offering on Wall Street come to pass.
At this point, however, the company is poised to become a "case study" in how NOT to purchase US companies.
Posted by: Josef Blumenfeld at June 22, 2005 4:23 PM
Josef,
You make a very interesting observation. In fact, this exactly parallels our own experience with major Chinese companies, which use PR firms only for crisis and only for short term fencing with media. There is not yet an embrace of PR as basis for building relationships with reporters and opinion leadaers. Let's see how Haier plays this now.
Richard
Posted by: Richard Edelman at July 6, 2005 1:29 PM
Richard, in your May 25,2005 post you mention visiting several manufacturing companies, inclucing Nomura. Can you tell me more about that company? What do they make, location, size, etc.
Posted by: Michael Wadsworth at September 1, 2005 8:52 AM
Michael,
Nomura is largest investment bank in Japan They have real interest in corporate social responsibility In fact Edelman Tokyo has just done a project with the firm Please contact Bob Pickard for more information
Posted by: Richard Edelman at September 1, 2005 9:59 AM