Luận văn structuring an advertising business in vietnam an example of fpt media the corporation for financing and promoting technology

‘The purpose of this thesis is lo «Furst, give out a systcmatical approach organizational structure thoory; © Second, discover the advertising industry, = Third, apply this theory inlo p

VIETNAM NATIONAL UNIVERSITY, HANOI

HANOI SCHOOL OF BUSINESS

VIETNAM NATIONAL UNIVERSITY, HANOT

HANOI SCHOOL OF BUSINESS

2 AUTHORITY AND CONTROL IN DESIGNING ORGANIZATIONAL STRUCTLRE, 9

1 OVERVIEW OF ADVERTISING INDUSTRY

2.2 ORGANIZAT-ON STRUCTURE OF WORLD ADVERTISING INDUSTRY 3A

2.3.4 Mulure of advertising industry in Vietnam - „34

24 ORGANIZATIONAL STRUCTURE SF VIETNAM ADVERTISING COMPANY 54

CHAPFER 3: EPI CORPORATION AND FPT MEDIA INTRODUCTION

3

vi

4412 When will we move to finctional orgenizational structure? ar

442 Which model will be choosing 10 implement ctf this thuế7

CONCLUSIO-

REFERENCES

APPENDIXA — WITAT IS ADVERTISING’

APPENDIXB LIST OF SOME BIG ADVERUISING AGENCY IN VIEINAM

PRY IN VIETNAM

APPENDIXC — SOMETHING ABOUL ADVERTISING INDUSI

APPENDIXD — TECHNIQUES IN ADVERTISING INDUSTRY

1 BACKROUND

Within scope of this thesis, 1 would like to study the organizational structure applying into the advertising industry and especially Victnarn advertising company — FPT Media, a part of FPT Corporation

Purpose of the thesis will be presented in the next section

From the theory, we may found a Jol of models thal ae studied, analyzed and applied Each model is designed for certain types of company with its own particulars: number of employees, business scale and business style After each development stage, depending on the situation, managers will decids which model will be chosen In some siluation, managers mmy skip certain periods of development, They are not always successful

‘The advertising industry is a partial of every industry Naturally, it has some its own particulars which differ from all other fields Basically, the organizational structure

in advortising firms do not have hig differont with others bul in fact, there are some

their own customizations

After 4 month m FPT Media, | found that, with a startup company, capital, business strategy, human zesource are important factors But the organizational structure is also crucial An organizational structure has direct impacts on the business

and ä Vicnam company (with ils own characteristics) Whal is current

organizational structure of FPT Media? Has is got any problem? If yes, how to repair it? How to make it better?

‘The purpose of this thesis is lo

«Furst, give out a systcmatical approach organizational structure thoory;

© Second, discover the advertising industry,

= Third, apply this theory inlo practical case of FPT Media — FPT corporation

to recommend the best solutions, which will help FPT Media managers have

a guide on how to manage organizational structure effectively,

© Fourth, identify some theoretical issue of organizational structure, which can apply in advertising companies in specific environment of Vietnam

The thesis studics organizational structure theorics, history and structuc of advertising industry and finally analyzes organizational structure in this industry

‘Three firs! chaplers of the thesis are researches on advertising industry and a local

firm with main objectives:

+ To access organizational siructure theorics

+ ‘To assess advertising industry and organizational structure in this industry

+ To assess a Vietnam firm: their organizational structure advantage and disadvantage

4 METITIODOLOGY

A lot of related documents on organizational structuze theory were gathered, analyzed, compared and customized for suitable with Vicnam advertising industry Sources of information were combined for use inchudes: books, intemet, media, and dialogues with experts

‘The survey B is fo identify how FPL Media staff think and satisfy with their organization, Because FPT Media is a young, firm so there are only more than 10 people so author has taken a sample of all of these 10 From this survey, we may

3

found real situation of HPT Media and their real expectation, (See appendix L}

Data collections methods

A lot of data collection methods were considered Because of constraints in terms of time, costs and human resources, a random sample from the whole population of advertising companies could not be obtained in this research Author has approached

17 big advertising companies in Hanoi and HCMC for the survey

For survey A, a total of 11 questionnaires were sent via email and 6 questionnaixes were sent by post, Notice phone calls were made in priot and follow up 8 in total of

11 questionnaixes via cinail were answer and usable With questiounaires by post, all

6 completed usable questionnaires were collected Author collected 14 usable questionnaires over 17in talal

‘The thesis would systematically help Vietnam advertising companies — especially FPT Media see what organizational structure is, the benefits and principles to effectively build organizational struoture Most importantly, the thesis has developed specitic activities, guidelines for Vietnamese advertising fixms in understanding and

building an effective organizational structure

‘The thesis is divided into four chapters

© Chapter One will review basic organizational stmcture theories

* Chapter Two and Chapter Three arc findings of the rclevant issues for the advertising industry and the company in point - FPT Media,

© Chapter Four will show recommendations from the case

CIIAPTER 1

A LITERATURE REVIEW OF THE ORGANIZATIONAL

STRUCTURE

11 BASIC CHALLENGES OF ORGANIZATIONAL DESIGN

If an organization is to remain effective as it changes and grows with its

environment, managers must continuously evaluate they way their organizations are

design: for oxample, they way work is divided among poople and departments, and the way it controls its aman, financial, and physical resources Organization design invelves difficult choices about how to control — that is, coordinate organizational asks and motivale the people who perform them — to maximize an organization's

ability to create value’

1.1.1 Four basic organizational design challenges confronting

managers and consultants

Pooplb in organization take on new tasks as the mood arises and it’s very unclear who

is responsible for what, and who is supposed to report 40 whom This makes it difficult to know on whom to call when the need arises and difficult to coordinate

peaple’s activities so they work together as a team

As organizations grow, manager must decide how to control and coordinate the activities that are required for the organization to create value, The principal design challenge is how to manage differentiation to achieve organization goals Differentiation is the process by which an organization allocates people and

L9 paol, 2034, ve nữ Đam

resources to organizational task and establishes ths task and authority relationships thal ullow the organization to achiove ils goals,

Organizations develop five functions lo accomplish their goals and objectives” support, production, maintenance, adaptive and managerial

= Support ñmeliow: Functions which ficilitate an organization's control of ils relations with its environment and its stakeholders, Support function includes purchasing, sales and marketing, public retations and legal affairs

- Production function: Function which manages and improves the efficiency of

am orgumivation’s conversion process so thal mơrs value is ercated

- Adaptive function: Functions which allow an organization to adjust to changes in the environment Adaptive functions include research and development, market research and long-range planning

- Managerial function: Fimclion which facilitale ihe control and coordination

of activities within and among department,

An organizational role is a scl of task-rclated behaviors required of an employee

‘An organization is composed of interlocking roles that are differentiated by task responsibilities and task authority Differentiation has a vertical and a horizontal dimension Vertical differentiation refers to the way an organization designs it hierarchy of authority Horizontal differentiation refers to the way organization groups roles into subunits (function and divisions)

Managers confront four design challenges as they coordinate organizational activities, The choices they make arc intonclated and collectively determine how

offcetively an organization operates

? Roa Ashkeras, Dave Uleich, Todd Jick and Steve Ker, 1998, Thr Bowndaryhsc Cryansqation: Breaking ths

haan of Orgonigntional Sirueiere New Vonks Josory Base

a The first challenge is to choose the right extent of vertical and horizontal b) The second challenge is to strike an appropriate balance between differentiation and misgraion and use appropriate integrating mechanismis

c The third challenge is to strike an approprinte halames between the centralization and decentralization of decision-making authority

4) ‘The fourth challenge is to strike an appropriate balance between slandardivalion and mulual adjustment by using the right amonnls of formalization and socialization

Differentiation is the process by which organization cvolve inlo complex systems

as they allocate people and resources to organizational task and assign people different levels of authority

Different organizational structures cause individuals fo behave in different ways Mechanistic structures ars designed to cause peuple lo bohave in predictable ways, Organic structures promote flexibility and quick response to changing conditions Successful organizations strike and appropnate balance between mechanistic and organic structures

1.1.2 Using contingency theory to design a structure that fits an

organization’s environment

Contingency approach: A management approach in which the design of an organizafion’s structure is tailored to the sources of uncertainty facing an

organization Contingency theory argacs that in order to tamage its envirorunent

effectively, an organization should design its structure and control systems to fit with the environment in which the organization operates.*

According to this theory, in order to manage its environment effectively, an organization should design its structure Io fil with he environment in whieh the

3], Paefler, 997 Ongnnigzinons ond Oxyanrgationad Themry

organization operates In other words, an organization must design its internal

structure 19 control Ihe 2xlernal environment

ORGANIZATLONAL STRUCTURE

A basic design challenge is deciding how much aulborily to contratize af the lop of organizational hierarchy and how much authority to decentralize to middle and lowest levels“ But what determines the shape of an organization's hierarchy — that is, the number of levds of authority wilhin an organization — and the sem of control al each level? This question is important because the shape of an organization determines how etiectively the organization's decision making and communication system work Decisions concerning the shape of hierarchy and the balance between centralized and decentralized decision making cstablish the extent of vertical differentiation in an organization

Stakeholder goals and objectives can be achieved only when organizational skills and capabilities are controlled through organization structure The activities of organizational members would be chaotic wilhoul ø structure thal assigns peaple to roles and directs the activities of people and fimction, An organization should design their hierarchy of authority and choose control system that creates an effective organization structure The shape of hicrarchy detcumines how decision making takes place It also determines how motivated people will be pursuer organizational goals Designing the hierarchy should be one of maragemenl’s major tasks,

1.2.1 ‘The height of an organization’s structure is a function of the number of levels

in the hierarchy, the span of control at zach level, and the balance between centralization and decentralization of authority

Tall organization: in which the hierarchy has many levels relative to the size of the organization Hat organization: the organization that has a few levels in its hricrarchy relative lo it siza

2001 The Network Orgenigadion in Themy and Practice, Hurvaid Business Rewiew

Vigure 2.1 Flat and tall organization

Flat ecructure: “alletuch re

As an organization grows, the increase in the size of the managerial component is less thant proportional to the increase in the size of the organization

12.2 Problems with tall hi

Motivation

As the number of Levels in the huerarchy increases, the relative difference

in the authority possessed by managers at each level decrease, as does thoir arca of rasponsibilily, A lat of organization has (ewer managers and hicrarchical lovels than a tall organization, sa a Mal organivation’s managers possess relatively more authority and responsibility than a tall

organization’s manager

Motivation in an organization wilh a lat structure may be stronger than

motivation in a tall organization

ai Theory, Despn, and change”,Peeniice Hall, 2094

1€

1.2.4 The span of control is the number of subordinates a manager dircetly manages

Organizations that become too tall inevitably experience problems Nevertheless,

an organization that is growing must control the activities of newly hired porsommel; how can an organization avoid becoming Loo tall? One way is by increasmg managers’ span of control If the span of control of each manager increases as the number of smployee increase, then the number of manager or hicrarehical levcls docs not inercasc in proportion to increases in the number of

employe

Figure 2.2 Spans of control

11

co

B supervises eight people The reason is the ability of manager

The two main factors that affect the span of control are task complexity and task interrelatedness

1.2.5 The shape of hierarchy and the way it works are also affected by choices concerning horizontal differentiation, centralization versus decentralization, differentiation versus integration, standardization versus mutual adjustment, and

the influence of the informal organization

When there are limits on the usefulness of direct personnel supervisor by

managers, organizations have to find other ways to control their activities

12

.6 The six principles of burcaucratic theory specify the most effective way to

design the hierarchy of authority in an organization

- A bureaucracy is founded on the concept of rational-legat authority

- Organizational roles are held on the basic of technical competence not because of social status, kinship or heredity

~ Á role's †ask responsibility and decision-making authority and its relationship

to other roles in the organization should be clearly specified

= The organivation of roles in a bureaucracy is such That each lower office in the hierarchy is under the control and supervision of higher office

- Rules, standard operating provsilures and normns should be used to control the behavior and relationships among reles in an organization

- Administrative acts, decisions and rules should be formulated and put in writing

Bureaucracy has several advantages It is fair and equitable, and it can promote orgonivation effevtive

‘The hierarchy of authority designed by management that allocates people and resources lo organivational task and roles is a bluoprint for how things are supposed to happen, However, at all levels in the organization, decision making and coordination frequently take place outside the formally designed channels as people interael informally on the job Morcover, many of the tules and norms

13

that employees use to perform their task emerge out of informal interactions belween people and not Grom the formal blueprint and rules established by managers Thus, while establishing a formal structure of interrelated roles, managers are also creating an informal social structure that affects behavior in ways that may he mnintended

12.8 To keop their organizations as ai xs possible managers aro increasingly making use of IT and creating self-managed work teams of empowered worker

and/or tuming to contingent workers

Designing organizational structure is a difficult and challenging task, Managzrs have

fo manage the vertical and horizontal dimensions of the structure continually and choose an appropriate allocation of authority and task responsibilities As an organization grows and becomes complex, changing its structure to respond to changing needs or contingencies become important,

Designing a structure that fit a company’s need is a large challenge Each structure has advantages and disadvantages, and managers have to be ready and willing to rodosign the organization in order to øbbản (he advanbg

and anticipate and minimize the problems of whichever structure they choose An organization that is in control of i structure has an important competitive advantage over one that is not Many organizations ignore the coordination problems inherent in the organizing process Tao ofien, an organization waits until # is already in trouble (in dectine) before attzmpting to deal with coordination and motivation problems The characteristic of the top manager team are very important in this regard because they determine how decision get make and how top managers perceive the problems the

organization is cxpericneing

14

131 A functional structure is a design that groups people because they have similar skills or use the same Tesourecs, Functional groups include finance, R&D,

marketing, and engineering All organizations begin as functional structures.®

Figure 2.3 A sample of functional structure

Another advantage of functional structure is that people who are grouped together by common skills can supervise one another and control each other's behavior The final advantage, people in a function who work closely with cach other over extended time periods develop norms and valuzs that allow them to become more effective at what they do

1.3.2 An organization need to adopt a more complex structure when it starts to

produce many products or when it confronts special needs, such as the need to produce new products quickly, to deal wilh differen! customer groups, ar lo

handle growth into new regions’

1.3.3 The move to a new complex structure is based on three dasign choices: increasing vertical differentiation, increasing horizontal differentiation, and

1331 Increasing vertical differentiation: To regain control in a vertical

direction, the organization needs to mercase vertical differcntialion This typically involves:

- Increasing the number of levels in the hierarchy

Deviding how tuch decision-making authority tơ ecrtralixe at the top of

‘The higher the level of differentiation, the more complex the integrating mechanisms that an organization needs in order (0 control ils activities

1.3.4 Most organizations move from a functional structure to some kind of

divisional structure: a product structure, a geographic struchwe, or ø market

structure.”

9H Minubeag, L987 The Sseurarmay of Orgumigutonal Siructorc, New Jessey: Paentice Hall

16

‘The structure that organizations most commonly adopt to solve the contrat problems that result from producing many differcnt kinds of pradacts in many different locations for many different type of clients is the divisional structure A divisional structure groups fictions according to the specific demands of products, markets, ar customers The goal behind the change ta a division structure is to create smaller, more manageable submits within an organization The types of divisional structure managers select depend on the specific control prablem lo be solved

» if the control problem is due to the number and complexity of products, the organization will divide ils activilics by product and use

a product structure

= If the contral problem is due to the number of locations in which the organization products and sells its products, the organization will

divide its avlivitios be region and use a geographic structure

* If the control problem is due to the need to scrviee a large number of different customer groups, the organization will divide its activities by customer group and use a market structure

1.3.5 There are three kinds of product structure: product division structure, tultidivisional structure, and product (cam structure

1.35.1 Prodnet division structure is used when an organization produces

broadly similar products that usc the same sct of support functions

Figure 2.5 Product division structure

‘© Garett: R, Jones, “Cigenizational Taec:y, Design, and cũ Hall, 2904

1.3.5.2 Multidivisional structures are available to organizations that are

growing rapidly and producing a wide variety of products or are entering

totally different kinds of industries

Figure 2.6 Multidivisional structure

Each division is dependent and has its own set of support functions

The corporate headquarters staff oversees the activities of the

divisional managers, and there are three levels of management: corporate, divisional and functional

Ina multidivisional structure, each product division is a self-contained

18

division with the operating structure that best suits it needs A central

headquarters staff is responsible for coordinating the activities of the

division in the organization When a lot of coordination between

divisions is required, a company can use a multidivisional matrix

Advantages of the multidivisional structures:

© Increased organizational effectiveness

© Increased control

© Profitable growth Internal labor market Disadvantages of the multidivisional structures

© Managing the corporate divisional relationship

* Coordination problem between division

© Transfer pricing

® Bureaucratic costs

® Communication problems

1.3.5.3 Product team structure put the focus on the product being the

produced Teams of functional specialists are organized around the product

to speed product development,

Figure 2.8 Product team structure

Each product team manager (PTM) supervises the activities associated

with developing and manufacturing a product

1.3.6 Geographic structures are used the organizations expand into new areas or

begin to manufacture in many different locations ''

This is one of three types of product structure, the multidivisional structure is

the one most often used by large organizations It provides the extra control that is important then a company produces a wide array of complex products

or services or enters new industries and needs to deal with different sets of

stakeholders and competitive forces However, when the control problems

that the companies experience are a function of geography, a geographic division structure, in which divisions are organized according to the

requirements of the different locations in which an organization operates, is

' Richatd HL Hall, and Pamela S, Tolbert, 1999 Organizations: Structures, Proceses, and Outcomes (4th Edition), Prentice Hall Gareth R Jones, “Organizational Theory, Design, and change” Prentice Hall, 2004

20

137 Market structures are used when organizations wish to group activities to

focus on the need of distinct customer groups *

Each customer group has a different marketing focus, and the job of each group is to develop products to suit the needs of its specific customers Each

group makes use of centralized support functions

Figure 2.10 Market structure

" Richard Ht Hall, and Pamela S, Tolbert, 1999 Organizations: Structures, Proceses, and Outrames (4th Editon), Prentice Hall Gareth R Jones, “Organizational Theory, Design, and change” Prentice Hall, 2004

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Commercial ammmerc ConsumerDivsion Government Division | Cerparate Dh

1.3.8 Matrix structures group activities by function and product ‘They are a special

kind of structure thal is available when an organivalion needs to deal with new or

lechnically sophisticated products in rapidly changing markets ?

Figure 2.11 Manx structure

Design, atsd chaage”,Drentice J Tall, 2904

racy and Janice Wolleth, 2062 Dapning Crysnegstions to Cate MeGree Hil Gareth K Jen

An organization with a mairix structure is differentiated into whatever

functions the organization necds to achieve its goals The organization itsel

is very flat, having minimal hierarchical levels within each function and decentralization authority lunctional employees report to the heads of their respective functions tut do not work under their direct supervision Instead, the work of fimetional personnel is dctsrmined primarily by membership in one of several cross-functional product teams under the leadership of a producl manager The members of team are called two-hoss employes because they report to two supervisors: the product team manager and functional manager

Both matrix structure and product team structure make use of teams to

coordinate activities, but they differ in two major respects

© ‘Team members in @ production team structure have only one boss: the

Advantage of matrix structure:

i) The use of cross functional teams is designed to reduce functional barriers and overcome the problem of submit

orientation

i) Tt opens up communieation between fimetional specialist and provides an opportunity for team members tiom different functions to leam from one another and develop their skills iil) The matrix enables an organization to maximize it use of skilled professionals, wha move from product to prodaot as needed

iv) The dual function and product focus promotes concer for both cost and quality

Disadvantage of matrix structure:

pp tà

i Lacks the advantage of bureaucratic structure With a flat hiemrchy am mininul rules and SOPs, the matrix lacks ä control structure that leads employee to develop stable expectations of one another

ii, ‘The lack of a clearly defined hierarchy of authority can also ead to coniliel between functions and product Loams aver the

Advantage of network structures:

- To the đogroe thai an organization can find a notwork partner thal can perform a specific functional activity reliably and at a lower cost, production cost are reduced

- ‘to the degree that an organization contracts with other organizations

ta perform specific value creation activities, il avaids the high

bureaucratic cost of operating a complex organizational structure

= Anetwork structure allows an orgartization to acl in an organic way

- Finally, a very important reason for the development of networks has been that the organizations gain access to low-cost foreign sources of inputs and functional expertise, something crucial in today’s changing global srviromnant

CHAPTER SUMMARY

If an organization is to remain effective as it changes and grows with its cuvizonment, managers zausl continuously cvalualc the way (heir organizations are design There are four basic organizational design challenges confronting managers and consultants

- How to choose the right extent of vertical and horizontal

differentiation

- Tlow lo strike an appropriate balance between differentiation and

integration and use appropriate integrating mechanisins

- How lo shike an appropriate balance between the centralization and decentralization of decision-making authority,

- How to strike an appropriate balance between standardization and mutual adjustinent by using the right, amounts of formalivation and socialization,

Designing orgerizational structure is a difficull and challenging tsk Managzrs have

to manage the vertical and horizontal dimensions of the structure continually and choose an appropriate allocation of authority and task responsibilities As an cuganivation grows and becomes complex, changing ils struciwe lo respond ta changing needs or contingencies become important

- All organizations begin as functional stiuctures, A functional structure

is a dasign that groups people because they have similar skills or use the same resources

= Afler the slarlup lime, most organizations move from a functional structure to some kind of divisional structure: a product structure, a geographic structure, or a market structure Each kind of divisional structures has some sub-kind models Hach these models has its own particulars and was designed base on the real situation of cach company

After review theory, we will

- Discover the advertising industry (in the next chapter): identify specific characteristics, history and the organization stmcture model This study will allow us have a brief understanding abont advertising industry and some of the most ficquently applying onganization

structure model

- Study FP; KPT Media and identify organization structure in this

corporation and also have SWOT anelysis their current situation

- After that, merging general theory with industry's characteristics and

cornpan

model for FPT Media

siination, we will choose the best organization structure

CHIAPTER 2 ORGANIZATIONAL STRUCTURE IN ADVERTISING

INDUSTRY

In this chapter, we will discover the advertising industry (in the world and in Vietnam) This study will allow us have a brief understanding about advertising industry and some of the most frequently applying organization structure model

2.1 OVERVIEW OF ADVERTISING INDUSTRY

Genarally speaking, advertising is the promotion of goods, services, companies and ideas, usually by an identified sponsor, Marketers see advertising as past of an overall promotional strategy, Other components of the promotional mix include publicity, public relations, personal selling and sales promotion’*

2.1.1 History®

Tn ancient times the most common form of advertising was ‘word of mouth However, commercial messages and election campaign displays were found in the ruins of Pompeii Egyptians used papyrus to create sales messages and wall posters Lost-and-found advertising on papyrus was common in Greece and Rome As printing developed in the 15th and 16th century, adverusing expanded to include

Miia “2 Wells, Sandra Moriasty and ‘ohn Burnett, 2030, Advertising : Principhs and Prachi “ind téditron) New Jersey: Prentice Hall

9 Adnco Linsted, 2006, TÁc suilanDy on Ana's alverising and marketing serview tds,

bà 8

handbills In the 17th century advertisements started to appear in weekly newspapers

‘These early print ads were used mainly to promote books (which were increasingly affordable) and medicines (which were increasingly sought after as disease ravaged Enrope and Britain) Quack ads became a problem, which ushered in regulation of

advertising content,

As the economy was expanding during the 19th century, the need for advertising

grew at the same pace In America, the classified ad became popular, filling pages of

newspapers with small print messages promating all kinds of goods The success of this advertising foumat led to the growth of mail-order advertising In 1843 the first advertising agency was established by Volney Palmer in Philadelphia At first the

agencies were just brokers for ad space in newspapers, but by the 20th century,

advertising agencies started to take over responsibility for the content as well

The 1960's saw advertising transform into a modem, more scientific approach in which crcativily was allowed Lo shine, producing unexpecied messages that made advertisements interesting to read ‘The Volkwagen ad campaign featuring such hoadlines as "Think Small” and "Lemon" ushersd in the cra of modem advertising by promoting a “position” or “unique selling proposition” designed to associate each brand with a specific idea in the reader or viewer's mind

Today, advertising is evolving even further, with "guerrilla" promotions that involve unusual approaches such as staged encounters in public places, giveaways of products such as cars that are covered with brand messages, and interactive advertising, where the viewer can respond to become patt of the advertising message

2.1.2 What is media?

Commercial advertising media can include billboards (outdoor advertising), street furniture components, printed flyers, radio, cinema and television ads, web banners, web popup, skywriting, bus stop benches, magazines, newspapers, town criers, sides

of buses, taxicab doors and roof mounts, ntusical slage shows, subway platforms and trains, elashe bands on disposable diapers, stickers on apples in supermarkets, the

and

opening scelion of streaming andio and video, and the backs of cvont tick

supermaiket receipts Any place an “identified” sponsor pays to deliver their message through a medium is advertising Covert advertising embedded in other

cntcrtainment media is known as product placement’®

The TV commercial is goncrally considered the most cffective mass-market advertising format and this is reflected by the high prices ‘IV networks charge for commercial airtime during popular TV cvenls The anual Super Row! football game

in the United States is known as much for its commercial advertisements as for the game iisell, and the average cost of a single thirty-second TV spot during this game

hhas reached $2.3 million (as of 2004)

Advertising on the World Wide Web is a recent phenomenon, Prices of Web-based advertising space ate dependent on the "relevance" of the surrounding web content and the traffic that the website receives

E-mail advertising is another recent phenomenon, Unsolicited blk E-mail advertising is known as "spam" A message is spam only when it is unsolicited and in bulk

Some companies have proposed to place messages or corporate logos on the side of

‘Wiliam >, Wells, Sacha Morimty anc Joba Buunst, 2900 shen inciples and Practice (3r4 Edition)

29

booster rockets and the Intemational Space Station Controversy exists on the

effectiveness of subliminal advertising (see mind control), and the pervasiveness of mass messages (see propaganda)

Unpaid advertising (also called word of mouth advertising), can provide good exposure at minimal cost Personal recommendations (“bring a fricnd", “sell it by zealot"), spreading buzz, or achieving the feat of equating a brand with a common

noun (“Hoaver! = "vacuum cleaner", "Klecnex" = “tissuc") these must provide the stuif of fantasy to the holder of an advertising, budget

The most common method for measuring the impact of mass media advertising is the

use of the rating point (tp) or Ihe more accurale target raling poinl (inp) These two

measures refer to the percentage of the universe of the existing base of audience members that can be reached by the use of cach media outlet in a particular moment

in Hime, The difference between the two is that the rating point refers to the

percentage to the entire universe while the target rating paint refers to the percentage

to a particular segment or largel This becomes very usefil when focusing advertising efforts on a particular group of people For example, think of an advertising campaign targeting a female audience aged 25 to 45 While the overall rating of a TV show might be well over 10 rating points it might very well happen that the same show in the same moment of time is generating only 2.5 trps (being the target: women between 25-45), This would mean that while the show has a large universe of viewers it is not necessarily reaching a large universe of women in the

Whereas marketing aims to identify markets that will purchase a product (business)

or support an idea and then fieilitate that purchase, advertising is the paid communication by which information about the product or idea is transmitted to potential consumers

In gcnoral, advertising is uscd to convey availability of a “product” (which can be a physical product, a service, or an idea) and to provide information regarding the product” This can stimudare demand for the product, onc of the main objectives of advertising, More specifically, there are three generic objectives of advertisements:

commun

information about a particular product, service, or brand (including announcing thc oxistence of the product, where to purchase it, and how to usc if), persuade people to buy the product, and keep the organization in the public eye (called institutional advertising) Most arlvertising blends clemenls of all three objectives ‘Typically new products are supported with informative and persuasive ads, while mature products use institutional and persuasive ads (sometimes called reminder ads), Advertising, fequently uses persuasive appeals, both logical and emotional (that is, it is a form of propaganda), sometimes even to the exclusion of any product information, More specific objectives include increases in short or long term sales, market share, awareness, product trial, mind share, brand name recall, product usc information, positioning or repositioning, and organizational image improvement

Examples of the ideas, informative or otherwise, that advertising tries to

usmally seeks to find a unique selling proposition (USP) of any product and communicate that to the user This may take the form of a unique product feature or a perceived benefit, In the face of increased competition within the market due to growing numbers of substitutes ther: is nore branding occurring in advertising This branding attributes a certain personality or reputation to a brand, termed brand cquity, which is distinctive from its competition Generally, brand cquily is a measure of the volume and homogeneity of, as well as positive and negative characteristics of, individual and cultural ideas associated with the product

Effective advertising will stimulale demand for a product and build brand equity and brand franchise, When cnoush brand cquity is created that the brand has the ability to draw buyers (even without further advertising), it is said to have brand franchise ‘The ultimate brand franchise is when the brand is so gravalont in people's mind (called mind share), that it is used to describe the whole category of products ‘This

phenomenon is sonietimes known as “hyper branding." Kleenex, for example, cant distinguish itself as a type of tissue or a label for a category of products, That is, itis frequently used as a generic term One of the most successfil firms to have achieved

a dominant brand franchise is Hoover, whose name was for a very lonp time synonymous with vacuum cleaner (and Dyson has subsequently managed to achieve similar status, having moved into the Hoover market with a morc sophisticated model of vacuum cleaner) The strength of a brand franchise can be established to greater or

cr degrees in various markets, In Texas, for example, ilis comman ta hear people refer to avy soft drink as a Coke, regardless of whether it is actually produced by Coca-Cola or nol (more accurate lerms would be ‘cola! ar ‘sode’)

A legal risk of the dominant brand franchise is thal the name can become so widely

accepted that it becomes a genetic term, and loses trademark protection Examples

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include “escalator”, "aspirin" and "mimeograph"

2.1.4 Future of Advertising industry

With the dawn of the intemet have come many new advertising opportunities Popup ads, Flash ads, banner ads, and email ads (often a form of spam) abound What the advertising community has recently begun to do is make the ads themselves desirable

to the public For example; Cadillac chose io advertise in the movie ‘The Matrix Reloaded’, which as a result contained many scenes in which Cadillac cars were used From some poinls of view the whole movie could be viewed as an ad, bul since

it was entertaining, the public desired to view it Lach year, greater sums are paid to obtain a commercial spot during (he Supor Bowl Companics alicmpt to make sure these commercials are very entertaining and many members of the public desire to

watch them

The advertising conmmmily has nol yel succeeded in making their ads available to the public Since the dawn of interesting and entertaining (desirable) advertising seme people have been so entertained by a particular ad that they might like to watch the ad later or show a friend The advertising community has not yet made it easy to acquire and watch an ad when and where a member of the public wants to A few members of the advertising community have uscd the Intomet to widely distribute their ads to anyone who wishes to see or hear them, In the future, more advertisers

may wish to do this, possibly by distributing their Idlavision advertisements for free from their websites, Considering that in most cases advertisers must pay to get their ads seen or heard, it could be valuable to allow those who wish to watch them to do

so ficcly and cven distribute them to others - by that classic method, word-of-mouth,

& g

Potentially (this has not been achieved to any degree) we could see the advertising community releasing quantities of fie advertising content in the form of pictures, sounds and video to the public for whatever use they wish (perhaps under a Creative Commons license) which would likely result in widespread viewing and distribution which is desirable for both the advertiser and the public who enjoy using the content

in theiy own ercations

2.2 Organization structure of World advertising industry

2.2.1 Types of Ad Agencies™*

Since ad agencies can range in size from a one- or two-person operation to large

the services offered and functions

organizations wilh over 1,000 employs

performed will vary This section examines the different types of agencies, the

as strategic market planning; sales promotions, direct marketing, and interactive

capabilities; package design, and public relations and publicity

‘The full-service agency is made up of departments that provide the activities needed

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die Moriaty ang Jobn Duanat, 220C ⁄£kertwmy: Principles and Practice (3rd Eidition)

to perform the various advertising functions and serve the client, as shown in Figure

An account service, or account management, is the link between the ad agency and

its clients Depending on the size of the client and its advertising budget, one or more account executives serve as liaison The account executive is responsible for

understanding the advertiser’s marketing and promotions needs and interpreting them

to agency personnel He or she coordinates agency efforts in planning, creating, and producing ads The account executive also presents agency recommendations and

obtains client approval

As the focal point of agency-client relationships, the account executive must know a

great deal about the client’s business and be able to communicate this to specialists

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in the ageney working on the account

2.2.1.3 Marketing Services

Over the past two decades, use of marketing services has increased dramatically One service gaining increased attention is research, as agencies realize that to communicate effectively with their clients’ customers; they must have a good understanding of the target audience Advertising planning process begins with a thorough situation analysis, which is based on research and information about the

target audience

Most full-service agencies maintain a research deparment whose function is to

gather, analyze, and interpret information that will be uscful in developing advertising for their clients This can be done through primary research where a study is designed, exceuted, and interpreted by the tescarch depart ment—or through the use of secondary (previously published) sources of information, Sometimes the research department acquires stutlies conducted by independent syndicated research fms or consultants, The rescareh staff then interprets these reports and passes on the information to other agency personnel working on that account, ‘he research dopartment may also design and conduct 1csoarch to protest the offactiveness of advertising the agency is considering Kot example, copy testing is often condnoted

to determing how m

ages developed by the crealive specialists are likely lo he interpreted by the receiving audience

The media department of an agency analyzes, selects, and contracts for space or time

in the media that will be used to deliver the client’s advertising message The media department is expected to develop a media plan that will reach the target market and effectively commmmicate the message Since most of the client’s ad budget is spent