A LITERATURE REVIEW OF THE ORGANIZATIONAL STRUCTURE
BASIC CHALLENGES OF ORGANIZATIONAL DESIGN
To maintain effectiveness amidst growth and environmental changes, organizations must continuously assess their design, including the division of work among individuals and departments, as well as the management of human, financial, and physical resources Effective organization design requires making challenging decisions regarding task coordination and employee motivation to enhance the organization's value creation capabilities.
1.1.1 Four basic organizational design challenges confronting managers and consultants
In organizations, the assignment of new tasks often leads to confusion regarding roles and responsibilities, making it unclear who is accountable for specific duties and to whom individuals should report This ambiguity hinders effective communication and coordination, complicating efforts to ensure that team members collaborate efficiently.
As organizations expand, managers face the critical task of controlling and coordinating activities essential for value creation The key design challenge lies in effectively managing differentiation to meet organizational goals Differentiation involves the strategic allocation of personnel and resources to optimize performance and achieve desired outcomes.
1 Whirlpool, 2002 www.whirlpool.com resources to organizational task and establishes the task and authority relationships that allow the organization to achieve its goals
Organizations develop five functions to accomplish their goals and objectives 2 : support, production, maintenance, adaptive and managerial
- Support function: Functions which facilitate an organization’s control of its relations with its environment and its stakeholders Support function includes purchasing, sales and marketing, public relations and legal affairs
The production function is essential for enhancing an organization's efficiency in its conversion processes, ultimately leading to greater value creation It encompasses key components such as production operations, production control, and quality control, all of which work together to optimize productivity and ensure high standards in output.
- Maintenance function: Function which enable an organization to keep its departments in operation Maintenance functions include personnel, engineering and janitorial services
- 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: Function which facilitate the control and coordination of activities within and among department
An organizational role is a set of task-related behaviors required of an employee
An organization consists of interconnected roles defined by specific task responsibilities and authority This differentiation occurs in two dimensions: vertical and horizontal Vertical differentiation pertains to the hierarchical structure of authority within the organization, while horizontal differentiation involves the grouping of roles into various subunits, such as functions and divisions.
Managers confront four design challenges as they coordinate organizational activities The choices they make are interrelated and collectively determine how effectively an organization operates
2 Ron Ashkenas, Dave Ulrich, Todd Jick and Steve Kerr, 1998 The Boundaryless Organization: Breaking the
In addressing the chains of organizational structure, several key challenges must be navigated Firstly, it is crucial to determine the optimal extent of vertical and horizontal integration Secondly, organizations must find a suitable balance between differentiation and integration, employing effective mechanisms for coordination The third challenge involves balancing centralization and decentralization in decision-making authority Finally, organizations should aim to achieve an equilibrium between standardization and mutual adjustment, utilizing the appropriate levels of formalization and socialization.
Differentiation is the process by which organization evolve into complex systems as they allocate people and resources to organizational task and assign people different levels of authority
Organizational structures significantly influence individual behavior within a company Mechanistic structures encourage predictable actions, while organic structures foster adaptability and rapid responses to dynamic environments To achieve success, organizations must find the right balance between these two structural approaches.
1.1.2 Using contingency theory to design a structure that fits an organization’s environment
The contingency approach to management emphasizes that an organization's structure should be customized to address the specific uncertainties it encounters According to contingency theory, effective management of an organization's environment requires aligning its structural design and control systems with the operational context.
According to this theory, in order to manage its environment effectively, an organization should design its structure to fit with the environment in which the
3 J Pfeffer, 1997 Organizations and Organizational Theory organization operates In other words, an organization must design its internal structure to control the external environment.
AUTHORITY AND CONTROL IN DESIGNING ORGANIZATIONAL STRUCTURE 9
A fundamental design challenge for organizations is balancing the centralization of authority at the top with decentralization at middle and lower levels The structure of an organization’s hierarchy, including the number of authority levels and the span of control, significantly impacts its decision-making and communication effectiveness Therefore, decisions regarding the hierarchy's shape and the degree of centralized versus decentralized decision-making are crucial, as they determine the extent of vertical differentiation within the organization.
Achieving stakeholder goals and objectives relies heavily on effective organizational skills and capabilities, which must be managed through a well-defined organizational structure Without such a structure, the activities of members can become chaotic, as roles and responsibilities remain unclear To establish an effective organization, it is crucial to design a clear hierarchy of authority and implement a suitable control system The structure of this hierarchy influences decision-making processes and impacts employee motivation towards achieving organizational goals Therefore, designing the hierarchy should be a primary focus for management.
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 each level, and the balance between centralization and decentralization of authority
A tall organization features multiple hierarchical levels in relation to its size, creating a complex structure In contrast, a flat organization has fewer levels within its hierarchy, resulting in a more streamlined and efficient framework.
4 W Baker, 2001 The Network Organization in Theory and Practice Harvard Business Review
Figure 2.1 Flat and tall organization
As an organization grows, the increase in the size of the managerial component is less than proportional to the increase in the size of the organization
1.2.2 Problems with tall hierarchies include communication, motivation, and bureaucratic costs 5
Excessive hierarchical levels can obstruct effective communication within an organization As the chain of command becomes longer, the time it takes for information to flow between top and bottom management increases This delay in communication slows down decision-making processes, ultimately hindering the organization's ability to respond swiftly to customer needs and competitive actions.
As organizational hierarchy increases, the authority and responsibility of managers at each level diminish In contrast, a flat organization, characterized by fewer hierarchical levels and managers, allows its leaders to maintain greater authority and responsibility compared to those in a tall organization.
Motivation in an organization with a flat structure may be stronger than motivation in a tall organization
5 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
Managers cost money The greater number if managers and hierarchy levels, the greater of bureaucratic cost
1.2.3 According to the principle of minimum chain of command, an organization should choose the minimum number if hierarchical levels consistent with the contingencies it faces
To enhance efficiency, organizations should aim for a flat structure, minimizing the number of managerial layers A flat organization fosters better communication, motivation, and cost-effectiveness compared to a tall structure The only justification for adopting a tall structure is the necessity for increased direct control or personal supervision over employees.
1.2.4 The span of control is the number of subordinates a manager directly manages
Organizations that become excessively tall often face challenges, particularly as they grow and hire new personnel To prevent this issue, one effective strategy is to expand the span of control for managers By increasing the number of employees each manager oversees without proportionately increasing the number of managers or hierarchical levels, organizations can maintain a more streamlined structure while effectively managing growth.
The illustration presents two distinct spans of control within organizations The first scenario features a CEO overseeing five managers, each responsible for supervising two employees, resulting in a total of ten employees In contrast, the second scenario depicts a CEO with only two managers overseeing the same number of employees, where Manager A supervises two individuals while Manager B manages the remaining eight This comparison highlights the differences in organizational structure and management distribution.
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
Typically, organizations first increase the level of horizontal differentiation and then decide in their responses to the design challenges
Horizontal differentiation leads to emergence of specialized subunits – functions or divisions
1.2.6 The six principles of bureaucratic theory specify the most effective way to design the hierarchy of authority in an organization
- A bureaucracy is founded on the concept of rational-legal authority
- Organizational roles are held on the basic of technical competence not because of social status, kinship or heredity
- A role’s task responsibility and decision-making authority and its relationship to other roles in the organization should be clearly specified
- The organization 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 procedures and norms should be used to control the behavior and relationships among roles 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 organization effectiveness by improving organizational effectiveness by improving organizational design
1.2.7 Managers need to recognize how the informal organization affects the way the formal hierarchy of authority works and make sure the two fit to enhance organizational performance
The management's hierarchy of authority serves as a blueprint for task allocation and organizational roles, yet decision-making and coordination often occur informally beyond these established channels Employees frequently develop their own rules and norms through informal interactions, rather than strictly adhering to the formal guidelines set by management Consequently, while managers create a formal structure of interrelated roles, they inadvertently foster an informal social structure that can influence behavior in unexpected ways.
1.2.8 To keep their organizations as flat as possible managers are increasingly making use of IT and creating self-managed work teams of empowered worker and/or turning to contingent workers.
DESIGNING ORGANIZATIONAL STRUCTURE
Designing an effective organizational structure is a complex challenge for managers, who must navigate both vertical and horizontal dimensions while strategically allocating authority and task responsibilities As organizations expand and evolve, it becomes crucial to adapt the structure to meet changing needs and respond to new contingencies.
Designing an organizational structure that aligns with a company's needs presents significant challenges Each structure comes with its own set of advantages and disadvantages, requiring managers to be prepared to redesign their organization to leverage benefits while mitigating potential issues Companies that effectively manage their organizational structure gain a crucial competitive edge over those that do not.
Many organizations overlook the coordination challenges that arise during the organizing process, often waiting until they face significant issues or decline to address problems related to coordination and motivation The characteristics of the top management team play a crucial role in this context, as they influence decision-making processes and shape how top managers perceive the organization's challenges.
1.3.1 A functional structure is a design that groups people because they have similar skills or use the same resources Functional groups include finance, R&D, marketing, and engineering All organizations begin as functional structures 6
Figure 2.3 A sample of functional structure
This model enables individuals to enhance their specialization and productivity by learning from one another When skilled individuals come together in a functional group, they can share effective problem-solving methods and efficient task execution techniques, fostering a collaborative learning environment.
A key benefit of a functional structure is that individuals with similar skills can oversee and regulate each other's actions, fostering a collaborative environment Additionally, prolonged collaboration among team members cultivates shared norms and values, enhancing their overall effectiveness in their roles.
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 with different customer groups, or to handle growth into new regions 7
1.3.3 The move to a new complex structure is based on three design choices: increasing vertical differentiation, increasing horizontal differentiation, and increasing integration 8
6 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004, p.160
7 J Child, 1977 Organization: A Guide for Managers and Administrators New York: Harper and Row
8 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
1.3.3.1 Increasing vertical differentiation: To regain control in a vertical direction, the organization needs to increase vertical differentiation This typically involves:
- Increasing the number of levels in the hierarchy
- Deciding how much decision-making authority to centralize at the top of the organization
- Deciding how much to use rules, SOPs, and norms to standardize behaviors and hence exert control over low-level employees
1.3.3.2 Increasing horizontal differentiation: To regain control in a horizontal direction, the organization needs to increase horizontal differentiation This involves overlaying a functional grouping with some other kind of submit grouping – most often, self-contained product terms or product divisions that process all the function resource they need to meet their goals
Figure 2.4 Vertical and horizontal differentiation
1.3.3.3 Increasing integration: To regain control in both vertically and horizontally, the organization needs to increase integration between subunits The higher the level of differentiation, the more complex the integrating mechanisms that an organization needs in order to control its activities
1.3.4 Most organizations move from a functional structure to some kind of divisional structure: a product structure, a geographic structure, or a market structure 9
9 H Mintberg, 1987 The Structuring of Organizational Structures New Jersey: Prentice Hall
Organizations often utilize a divisional structure to address control issues arising from the production of diverse products across various locations and for different clients This structure organizes functions based on the unique requirements of products, markets, or customers, aiming to establish smaller, more manageable units within the organization The choice of divisional structure is influenced by the specific control challenges that need to be addressed.
If the control problem is due to the number and complexity of products, the organization will divide its activities by product and use a product structure
To address control challenges arising from multiple sales locations, the organization will implement a geographic structure by dividing its operations by region.
To effectively address control challenges arising from servicing diverse customer groups, organizations often segment their operations by customer category and adopt a market-oriented structure.
1.3.5 There are three kinds of product structure: product division structure, multidivisional structure, and product team structure 10
1.3.5.1 Product division structure is used when an organization produces broadly similar products that use the same set of support functions
10 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
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
Senior Vice President Research & Development
Senior Vice President Materials Corporate Headquarters Staff
Support functions Support functions Support functions Support functions
Each division operates independently with its own support functions, while corporate headquarters supervises divisional managers across three management levels: corporate, divisional, and functional The structure of each division is tailored to meet its specific needs, and a central headquarters staff coordinates activities within the organization In cases where significant coordination between divisions is necessary, a multidivisional matrix structure may be employed.
Figure 2.7 A Multidivisional structure in which division has a different structure
Senior Vice President Research & Development
Senior Vice President Materials Corporate Headquarters Staff
Functional Structure Product Division Structure
Advantages of the multidivisional structures:
Internal labor market Disadvantages of the multidivisional structures:
Managing the corporate divisional relationship
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
Senior Vice President Research & Development
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 11
The multidivisional structure is commonly utilized by large organizations to manage a diverse range of complex products or services, allowing for enhanced control over various stakeholders and competitive dynamics However, when control issues arise from geographical factors, a geographic division structure is more effective, organizing divisions based on the specific needs of different operational locations.
11 Richard H Hall, and Pamela S Tolbert, 1999 Organizations: Structures, Processes, and Outcomes (4th Edition), Prentice Hall Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004 available
1.3.7 Market structures are used when organizations wish to group activities to focus on the need of distinct customer groups 12
Different customer groups require distinct marketing strategies, with each group tasked with creating products tailored to their specific clientele To enhance efficiency, all groups utilize centralized support services.
12 Richard H Hall, and Pamela S Tolbert, 1999 Organizations: Structures, Processes, and Outcomes (4th Edition), Prentice Hall Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004
ORGANIZATIONAL STRUCTURE IN ADVERTISING INDUSTRY
OVERVIEW OF ADVERTISING INDUSTRY
Advertising is the strategic promotion of goods, services, companies, and ideas by a recognized sponsor It plays a crucial role in a broader promotional strategy that encompasses various elements such as publicity, public relations, personal selling, and sales promotions.
In ancient times, 'word of mouth' was the primary method of advertising, but evidence of commercial messages and election campaign displays has been discovered in the ruins of Pompeii Egyptians utilized papyrus for sales messages and wall posters, while lost-and-found advertisements were prevalent in Greece and Rome With the advancement of printing in the 15th and 16th centuries, advertising began to expand significantly.
14 William D Wells, Sandra Moriarty and John Burnett, 2000 Advertising : Principles and Practice (3rd Edition) New Jersey: Prentice Hall
15 Adarco Limited, 2000 The authority on Asia’s advertising and marketing services industry handbills In the 17th century advertisements started to appear in weekly newspapers
Early print advertisements primarily promoted affordable books and sought-after medicines during a time when disease spread across Europe and Britain The rise of misleading "quack" ads led to the need for regulation in advertising content.
During the 19th century, the expanding economy drove a significant rise in advertising, particularly through the popularity of classified ads in American newspapers This format not only promoted various goods but also paved the way for the emergence of mail-order advertising In 1843, Volney Palmer founded the first advertising agency in Philadelphia, initially serving as a broker for newspaper ad space However, by the 20th century, advertising agencies began to assume greater responsibility for creating content, marking a pivotal shift in the industry.
The 1960s marked a significant transformation in advertising, embracing a modern and scientific approach that highlighted creativity and produced engaging messages The Volkswagen ad campaign, featuring memorable headlines like "Think Small" and "Lemon," pioneered this era by promoting a unique selling proposition, effectively linking each brand to a specific concept in the minds of consumers.
Modern advertising is rapidly evolving, embracing "guerrilla" marketing techniques that utilize unconventional methods, such as orchestrated public encounters, branded giveaways like cars, and interactive campaigns that engage viewers, allowing them to participate in the advertising narrative.
Commercial advertising encompasses various media formats, including billboards, street furniture, printed flyers, radio, cinema, television ads, web banners, skywriting, and more It also appears on bus stop benches, magazines, newspapers, and even on the sides of buses and taxicabs Other creative placements include stickers on supermarket items, streaming audio and video openings, and the backs of event tickets and receipts Essentially, advertising occurs wherever an identified sponsor pays to communicate their message, with product placement being a form of covert advertising within entertainment media.
Television commercials are widely regarded as the most impactful form of mass-market advertising, evident in the premium rates charged by TV networks for commercial airtime during major events A prime example is the Super Bowl, which is famous not only for the football game but also for its high-profile advertisements As of 2004, the average cost for a thirty-second commercial during the Super Bowl has soared to $2.3 million, highlighting the significant value placed on this advertising medium.
Web-based advertising is a relatively new development, with costs for advertising space influenced by the relevance of nearby content and the volume of traffic the website attracts.
E-mail advertising is another recent phenomenon Unsolicited bulk 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
Subliminal advertising remains a contentious topic, with debates surrounding its effectiveness and the widespread impact of mass messaging, akin to propaganda This discussion is underscored by the insights of William D Wells, Sandra Moriarty, and John Burnett in their 2000 publication, "Advertising: Principles and Practice."
Unpaid advertising, often referred to as word-of-mouth advertising, offers significant exposure at little to no cost Strategies such as personal recommendations, buzz generation, and the ability to make a brand synonymous with a common noun—like "Hoover" for vacuum cleaners or "Kleenex" for tissues—can be incredibly appealing for those managing advertising budgets.
The impact of mass media advertising is primarily measured using rating points (rp) and target rating points (trp) While rating points indicate the percentage of the total audience reached by a media outlet, target rating points focus on specific segments, making them invaluable for targeted advertising For instance, an advertising campaign aimed at women aged 25 to 45 may find that a TV show has a high overall rating of 10 rp but only achieves 2.5 trp for that demographic This discrepancy highlights that a show with a large viewer base may not effectively reach the desired audience, making it less suitable for advertisers targeting that specific group.
Marketing focuses on identifying target markets for products or ideas and facilitating their purchase, while advertising involves paid communication that delivers information about these products or ideas to potential consumers.
Advertising serves to inform potential customers about the availability of products, services, or ideas, ultimately stimulating demand Its primary objectives include communicating essential information about a product, persuading consumers to make a purchase, and maintaining brand visibility through institutional advertising Typically, new products are promoted with informative and persuasive ads, while established products often rely on reminder and institutional ads Persuasive techniques, both logical and emotional, are commonly employed, sometimes prioritizing appeal over product details Specific goals of advertising encompass increasing sales, market share, brand awareness, product trials, brand recall, and enhancing organizational image.
Examples of the ideas, informative or otherwise, that advertising tries to communicate are product details, benefits and brand information Advertising
In his book "Truth, Lies and Advertising," Jon Steel (1998) emphasizes the importance of identifying a unique selling proposition (USP) for products to effectively communicate with consumers As competition increases and more substitutes enter the market, branding plays a crucial role in advertising, helping to establish a brand's personality and reputation, known as brand equity This brand equity is measured by the volume and consistency of both positive and negative associations, reflecting individual and cultural perceptions of the product, thereby distinguishing it from competitors.
O RGANIZATION STRUCTURE OF W ORLD ADVERTISING INDUSTRY
Advertising agencies vary significantly in size, from small teams of one or two to large organizations with over 1,000 employees This diversity influences the range of services they provide and the functions they perform for clients This section explores the different types of agencies, their service offerings, and their organizational structures.
Many businesses utilize full-service agencies that provide comprehensive marketing, communications, and promotional services These agencies handle everything from advertising planning and creation to research and media selection Additionally, they may offer non-advertising services such as strategic market planning, sales promotions, direct marketing, interactive capabilities, package design, and public relations.
The full-service agency is made up of departments that provide the activities needed
18 William D Wells, Sandra Moriarty and John Burnett, 2000 Advertising : Principles and Practice (3rd Edition) to perform the various advertising functions and serve the client, as shown in Figure 2.1
Figure 2.1 Full-service agency organizational chart
Account management serves as the vital connection between an advertising agency and its clients, with one or more account executives acting as liaisons based on the client's size and budget These executives are tasked with comprehending the client's marketing and promotional needs, effectively communicating these requirements to the agency team They play a crucial role in coordinating the planning, creation, and production of advertisements, while also presenting agency recommendations and securing client approvals.
The account executive serves as the central link in agency-client relationships, requiring a deep understanding of the client's business This knowledge is essential for effectively communicating the client's needs and objectives to the specialists within the agency who are handling the account.
In the last twenty years, the demand for marketing services has surged significantly, particularly for research services Agencies recognize that to effectively engage their clients' customers, a deep understanding of the target audience is essential Consequently, the advertising planning process starts with a comprehensive situation analysis grounded in research and insights about the intended audience.
Full-service agencies often have a dedicated research department responsible for gathering, analyzing, and interpreting valuable information to enhance client advertising This research can be conducted through primary methods, where the department designs and executes studies, or by utilizing secondary sources from previously published data Additionally, they may acquire insights from independent syndicated research firms The research team interprets these findings and shares them with agency personnel involved in specific accounts Furthermore, the department may conduct pretesting to evaluate the effectiveness of proposed advertising strategies, such as copy testing, to gauge audience interpretation of creative messages.
The media department of an agency is responsible for analyzing, selecting, and contracting media space or time to effectively convey the client's advertising message It is crucial for this department to create a media plan that targets the appropriate audience while ensuring cost-effectiveness, as a significant portion of the client's advertising budget is allocated to media placements By focusing on reaching the target market efficiently, the media department plays a vital role in maximizing the impact of the client's advertising efforts.
Media specialists need to understand the audience demographics and media consumption habits to effectively align with the client's target market The media department analyzes data on readership, listenership, and viewing patterns to create a strategic media plan Subsequently, the media buyer executes this plan by acquiring the necessary advertising time and space across various platforms.
The media department is increasingly vital to agency operations, as the ability to negotiate prices and utilize diverse media channels is now as crucial as ad creation Major agencies have established independent media services to enhance client support; for instance, Leo Burnett created Starcom, McCann Erickson formed Universal McCann, and Foote Cone and Belding launched Horizon.FCB These media companies primarily cater to their agency's clients but also provide services to others Many large advertisers, like General Motors and Nestlé, have consolidated their media buying with these firms, aiming to reduce costs and enhance media efficiency, with General Motors entrusting $3.6 billion to Starcom and Universal McCann managing nearly $1 billion in Nestlé's global media business.
Research and media departments handle essential functions for full-service agencies to effectively plan and implement advertising strategies for their clients Additionally, some agencies provide extra marketing services to support clients in various promotional aspects.
An agency often includes a dedicated sales promotion or merchandising department that focuses on creating contests, premiums, promotions, and point-of-sale materials Additionally, it may employ direct-marketing specialists and package designers, alongside a public relations and publicity team To adapt to the digital landscape, many agencies have established interactive media departments for website development The rise of integrated marketing communications has encouraged full-service agencies to expand their offerings and enhance their capabilities across various promotional disciplines.
The creative services department specializes in developing and implementing advertisements, with copywriters playing a crucial role in crafting the ideas, headlines, subheads, and body copy that convey the campaign's message These professionals also help define the ad's core appeal or theme and may create an initial visual layout for print ads or television commercials.
Copywriters focus on the message of an advertisement, while the art department is tasked with its visual presentation In print advertising, art directors and graphic designers create layouts that illustrate the final design of the ad For television commercials, this visual plan is referred to as a storyboard, consisting of a series of frames or panels that represent the commercial in a static format.
The creative department collaborates to craft advertisements that effectively convey the essential elements of the client’s creative strategy for their product or service Under the guidance of the agency's creative director, writers and artists work together to ensure cohesive and impactful advertising output.
The director sets the creative philosophy of the department and may even become directly involved in creating ads for the agency’s largest clients
Once the copy, layout, illustrations, and mechanical specifications of an advertisement are completed and approved, the project is handed over to the production department Most agencies outsource the production of finished ads to printers, engravers, photographers, typographers, and other suppliers In broadcast production, the approved storyboard is transformed into a commercial, with the production department overseeing casting, scene settings, and the selection of an independent production studio They may also hire external directors, such as Spike Lee for Nike and Kmart or John Glen for Airwalk shoes, to bring the creative concept to life Various stakeholders, including copywriters, art directors, account managers, and client representatives, often collaborate on production decisions, especially when substantial investments are at stake.
T HE ADVERTISING INDUSTRY IN V IETNAM
2.3.1 A Decade of Change for Advertising in Vietnam
The advertising industry in Vietnam has rapidly evolved over the past fifteen years, transitioning from a focus on trade fairs and outdoor signage to a more dynamic landscape The lifting of the ban on television commercials in 1991 marked a significant turning point, allowing for greater creativity and reach in advertising strategies.
The Vietnam advertising industry, as reported by the Vietnam Advertising Association and various media outlets, has rapidly evolved to leverage new media opportunities Despite facing challenges such as the introduction of foreign cultures and the transformation of urban landscapes, advertising has become an integral part of daily life for consumers This sector includes billboards, television, print, radio, and online platforms Recognized by the Vietnamese Government for its growth potential, the industry is eager to advance, fueled by foreign investment and rising consumerism, and aims to align itself with the progress of neighboring Asian markets.
The Vietnamese advertising industry has evolved from sign-making to a dynamic sector of multimedia agencies offering comprehensive media and creative services Local agencies have rapidly adapted to new media, mastering skills such as TV campaign production and website development that were unfamiliar a decade ago International agency networks are establishing offices in Vietnam, collaborating with local firms to enhance expertise in modern advertising processes While the market's growth presents numerous opportunities, it also introduces challenges as local businesses navigate free competition, and international companies adjust to the unique market environment.
2.3.2 Foreign Advertising Agencies in Vietnam
Vietnam is home to approximately 34 foreign agency networks, including prominent names such as Lowe Lintas, Asatsu-DK, Asian Advertisers Inc., BBDO Asia Pacific, Bates Worldwide, Chuo Senko, Daiko Advertising, and Dentsu Inc.
Young & Rubicam, Hakuhodo Inc, J Walter Thompson, Leo Burnett, McCann- Erickson, Ogilvy & Mather, Prakit & FCB Pcl and Saatchi & Saatchi Advertising, etc
Most agencies in Vietnam operate under a representative office license, limiting their ability to conduct direct business; they primarily gather information for potential joint ventures or foreign-owned companies Currently, only Leo Burnett has secured a Business Cooperation Contract, enabling them to legally engage with local agencies for media purchases and client billing in local currency Recently, Saatchi & Saatchi received the first five-year joint venture license alongside local partner Venus Advertising, allowing them to function as a full-service agency in Vietnam, which is a more advantageous arrangement than a Business Cooperation Contract Additionally, DY&R is reportedly progressing towards obtaining a joint venture license as well.
The advertising industry increasingly agrees that fostering collaboration between local and international agencies can significantly benefit both business operations and the overall industry landscape.
2.3.3 Local Advertising Agencies in Vietnam
In Vietnam, there are approximately 20 local agencies offering comprehensive advertising services among a total of around 3,000 advertising companies Notable agencies include A Chau Advertising, An Tiem Advertising, Goldsun Advertising, and Saigon Advertising, among others These firms, such as Hoang Gia Advertising and Lotus Communications, contribute to the vibrant advertising landscape in the country, providing a range of services from marketing design to exhibition construction.
The Vietnamese advertising industry is still in its early development stages, with a scarcity of local professionals boasting over 5-8 years of experience As a result, many practitioners are sourced from other sectors like law, trading services, and architecture Those with advertising experience often come from state-owned agencies or international firms operating in Vietnam, and they are still acquiring essential skills and insights into the industry After five years of challenging growth, the landscape is beginning to change, with new, dynamic agencies emerging from energetic teams that blend entrepreneurial spirit with initial agency experience These innovative companies are set to become the trailblazers of Vietnam's advertising future.
In Vietnam, approximately 3,000 local companies compete with around 30 foreign firms in the advertising sector; however, a striking 77% of the country's advertising revenue is generated by foreign companies Despite the significant support local firms receive from the government in terms of tax and regulations, foreign advertising agencies face restrictions, as they are required to partner with local firms to sign advertising contracts with television networks.
2.3.4 Future of advertising industry in Vietnam
Vietnam's Consumer Price Index is forecasted to experience a significant surge, with an anticipated 7% increase in 2000 driven by the resurgence of domestic consumer demand This upward trend is expected to continue, with the Consumer Price Index projected to reach around 8% by 2005 However, a portion of this increase can be attributed to higher prices resulting from shortages in foodstuffs, largely caused by the devastating floods of the previous year.
In 1999, advertising expenditure rose by 6% compared to 1998, reflecting a growing market By 2004, Vietnam's advertising spending reached approximately $350 million, mirroring the country's GDP growth This figure represents a twentyfold increase since 1994 Major foreign companies, including Unilever and Coca-Cola, have notably ramped up their advertising budgets to capture larger market shares.
O RGANIZATIONAL STRUCTURE IN V IETNAM ADVERTISING COMPANY
In Vietnam, advertising companies work in all fields of advertising industry Following are some of them:
- Full-Service Agencies: Admaker, Dat Viet, Goldsun
- Marketing Services: T&A, VMC, Vietnam Marcom
- Creative Services: NVV, Stormeye, Crea TV
- Media Buying Services: Mindshare, TVplus, Vietba Media
- Sales Promotion Agencies: Maketeers, Nhat Khang,
- Public Relations Firms: Max Communication, AVC, Venus
- Marketing Research Companies: Taylor Nelson, ACNielson
- Agency Organization and Structure Organizational structure in all these companies still follows the standard model (see figure 3.1 Full-service agency organizational chart)
With each company, base on their own condition, they will expanse or reduce number of their department In the case of Goldsun Groups, they break their firm into
5 sub-companies These companies work together as the following model
Figure 3.4 The divisional structure model
Senior Vice President Research & Development
Senior Vice President Materials Corporate Headquarters Staff
Functional Structure Product Division Structure
Advertising is the strategic promotion of goods, services, companies, and ideas by a recognized sponsor, forming a key element of a broader promotional strategy This strategy encompasses various components, including publicity, public relations, personal selling, and sales promotion, all working together to enhance visibility and engagement.
This chapter already examined the different types of agencies, the services they perform for their clients, and how they are organized Following are some main types of advertising agency:
The advertising industry in Vietnam has rapidly evolved over the past fifteen years, expanding from basic trade fairs and outdoor signage to a robust sector with approximately 3,000 agencies These firms play a crucial role in various fields within the industry, significantly contributing to Vietnam's overall development and growth.
Despite entering the market later and lacking competitive advantages compared to foreign firms, local companies have established a strong market presence With limited capital and experience, they concentrate on sectors where foreign firms face restrictions or collaborate with them Additionally, these organizations adopt the models of international firms while customizing their approaches to align with the unique conditions in Vietnam.
After exploring theoretical frameworks and the advertising industry, we have gained a foundational understanding of organizational structure models, including their unique characteristics and historical context In the upcoming chapters, we will delve deeper into these topics.
- Study FPT; FPT Media and identify organization structure in this corporation and also have SWOT analysis their current situation
- After that, merging general theory with industry’s characteristics and company’s situation, we will choose the best organization structure model for FPT Media.