Structuring an advertising business in Vietnam (an example of FPT media - the corporation for financing and promoting technology)

6 1.1.2 Using contingency theory to design a structure that fits an organization’s environment 8 1.2 AUTHORITY AND CONTROL IN DESIGNING ORGANIZATIONAL STRUCTURE... FPT Media, a startup f

vietnam national university, HANOI

hanoi school of business

vietnam national university, HANOI

hanoi school of business

TABLE OF CONTENTS

ABSTRACT I

ACKNOWLEDGEMENTS V

TABLE OF CONTENTS VI

INTRODUCTION 1

1 BACKROUND 1

2 PURPOSE 1

3 KEY RESEARCH AREAS 2

4 METHODOLOGY 3

5 CONTRIBUTIONS OF THE THESIS 4

6 OUTLINE 4

CHAPTER 1 : A LITERATURE REVIEW OF THE ORGANIZATIONAL STRUCTURE 6

1.1 BASIC CHALLENGES OF ORGANIZATIONAL DESIGN 6

1.1.1 Four basic organizational design challenges confronting managers and consultants 6

1.1.2 Using contingency theory to design a structure that fits an organization’s environment 8 1.2 AUTHORITY AND CONTROL IN DESIGNING ORGANIZATIONAL STRUCTURE 9 1.3 DESIGNING ORGANIZATIONAL STRUCTURE 14

CHAPTER 2: ORGANIZATIONAL STRUCTURE IN ADVERTISING INDUSTRY 27

2.1 OVERVIEW OF ADVERTISING INDUSTRY 27

2.1.1 History 27

2.1.2 What is media? 28

2.1.3 Objectives 30

2.1.4 Future of Advertising industry 33

2.2 O RGANIZATION STRUCTURE OF W ORLD ADVERTISING INDUSTRY .34

2.2.1 Types of Ad Agencies 34

2.2.2 Other Types of Agencies and Services 40

2.2.3 Specialized Services 42

2.2.4 Collateral Services 47

2.2.5 Organization Structure of World Advertising Industry 48

2.3 T HE ADVERTISING INDUSTRY IN V IETNAM .50

2.3.1 A Decade of Change for Advertising in Vietnam 50

2.3.2 Foreign Advertising Agencies in Vietnam 51

2.3.3 Local Advertising Agencies in Vietnam 52

2.3.4 Future of advertising industry in Vietnam 53

2.4 O RGANIZATIONAL STRUCTURE IN V IETNAM ADVERTISING COMPANY .54

CHAPTER 3: FPT CORPORATION AND FPT MEDIA INTRODUCTION 58

3.1.1 Business .58

3.1.2 Products and Services .59

3.1.3 Organizational Chart 60

3.1.4 Human Resource 61

3.1.5 Organization structure 62

3.2 FPT M EDIA INTRODUCTION .63

3.2.1 Introduction 63

3.3.2 Experience 64

3.3.3 Operations 64

3.3.4 SWOT analysis 65

3.3.5 Current structure 66

CHAPTER 4: SITUATION ANALYSIS AND RECOMMENDATION 70

4.1 S ITUATION A NALYSIS .70

4.2 S UITABLE TIME FOR CHOOSING NEW ORGANIZATIONAL STRUCTURE .71

4.3 N EW ORGANIZATIONAL STRUCTURE ’ S SWOT ANALYST : 79

4.4 I MPLEMENTATION P LAN .81

4.4.1 When will we move to functional organizational structure? 81

4.4.2 Which model will be choosing to implement at this time? 83

CONCLUSION 85

REFERENCES 86

APPENDIX A WHAT IS ADVERTISING? 88

APPENDIX B LIST OF SOME BIG ADVERTISING AGENCY IN VIETNAM 90

APPENDIX C SOMETHING ABOUT ADVERTISING INDUSTRY IN VIETNAM 92

APPENDIX D TECHNIQUES IN ADVERTISING INDUSTRY 94

APPENDIX E LIST OF INTERVIEWEES 98

APPENDIX F AN EXAMPLE OF ORGANIZATIONAL STRUCTURE IN FPT CORPORATION 100

INTRODUCTION

Within scope of this thesis, I would like to study the organizational structure applying into the advertising industry and especially Vietnam 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 lot of models that are 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 decide which model will be chosen In some situation, managers may 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 advertising firms do not have big different with others but in fact, there are some their own customizations

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

FPT Media, a startup firm, belongs to a big IT corporation in Vietnam, cannot be outside of the intersection point between organizational structure in theory (which were designed for all kind of companies); advertising industry (so many kind of services) and a Vietnam company (with its own characteristics) What 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 to:

 First, give out a systematical approach organizational structure theory;

 Second, discover the advertising industry;

 Third, apply this theory into 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 studies organizational structure theories, history and structure of advertising industry and finally analyzes organizational structure in this industry Three first chapters of the thesis are researches on advertising industry and a local firm with main objectives:

 To access organizational structure theories

 To assess advertising industry and organizational structure in this industry

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

4 METHODOLOGY

A lot of related documents on organizational structure theory were gathered, analyzed, compared and customized for suitable with Vietnam advertising industry Sources of information were combined for use includes: books, internet, media, and dialogues with experts

Population and Sample

With the first survey (survey A), the author assesses organizational structure in

advertising industry and especially in Vietnam market There are about nearly 4.000 advertising companies in Vietnam now As most companies are based in Ho Chi Minh City (HCMC) – most of big firms and Hanoi, we took the sample of 8 companies in Hanoi and 9 others in HCMC These 17 companies are big firms (in total of 40 biggest advertising firms in Vietnam); they cover most of the adverting market and they provide most of service in adverting industry This sample is typical enough to withdraw conclusions about advertising industry and Vietnam advertising industry The questionnaires are delivered to one or two key persons in each company

The survey B is to identify how FPT 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

found real situation of FPT Media and their real expectation (See appendix E)

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 questionnaires were sent by post Notice phone calls were made in prior and follow up 8 in total of

11 questionnaires via email were answer and usable With questionnaires by post, all

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

The thesis would systematically help Vietnam advertising companies – especially FPT Media – see what organizational structure is, the benefits and principles to effectively build organizational structure Most importantly, the thesis has developed specific activities, guidelines for Vietnamese advertising firms in understanding and building an effective organizational structure

The thesis is divided into four chapters

 Chapter One will review basic organizational structure theories

 Chapter Two and Chapter Three are findings of the relevant issues for the advertising industry and the company in point – FPT Media

 Chapter Four will show recommendations from the case

CHAPTER 1

A LITERATURE REVIEW OF THE ORGANIZATIONAL

STRUCTURE

1.1 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 example, they way work is divided among people and departments, and the way it controls its human, financial, and physical resources Organization design involves difficult choices about how to control – that is, coordinate organizational tasks and motivate the people who perform them – to maximize an organization’s ability to create value1

1.1.1 Four basic organizational design challenges confronting managers and consultants

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

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

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 objectives2: 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

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

an organization’s conversion process so that more value is created Production functions include production operations, production control, and quality control

- 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 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 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

Chains of Organizational Structure New York: Jossey-Bass

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 integration and use appropriate integrating mechanisms

c) The third challenge is to strike an appropriate balance between the centralization and decentralization of decision-making authority

d) The fourth challenge is to strike an appropriate balance between standardization and mutual adjustment by using the right amounts 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

Different organizational structures cause individuals to behave in different ways Mechanistic structures are designed to cause people to behave in predictable ways Organic structures promote flexibility and quick response to changing conditions Successful organizations strike and appropriate 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 organization’s structure is tailored to the sources of uncertainty facing an organization Contingency theory argues that in order to manage its environment effectively, an organization should design its structure and control systems to fit with the environment in which the organization operates.3

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

ORGANIZATIONAL STRUCTURE

A basic design challenge is deciding how much authority to centralize at the top of organizational hierarchy and how much authority to decentralize to middle and lowest levels4 But what determines the shape of an organization’s hierarchy – that is, the number of levels of authority within an organization – and the span of control at each level? This question is important because the shape of an organization determines how effectively the organization’s decision making and communication system work Decisions concerning the shape of hierarchy and the balance between centralized and decentralized decision making establish 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 without a structure that assigns people to roles and directs the activities of people and function An organization should design their hierarchy of authority and choose control system that creates an effective organization structure The shape of hierarchy determines how decision making takes place It also determines how motivated people will be pursuer organizational goals Designing the hierarchy should be one of management’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 each 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 Flat organization: the organization that has a few levels in its hierarchy relative to it size

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 costs5

1.2.2.1 Communication

Having too many hierarchical levels may hinder communication As the chain of command lengthens, communication between managers at the top and the bottom of the hierarchy takes longer Decision making slows, and the shutdown hurts the performance of organization that need to respond quickly to customers; needs or the actions of competitors

1.2.2.2 Motivation

As the number of levels in the hierarchy increases, the relative difference

in the authority possessed by managers at each level decrease, as does their area of responsibility A flat of organization has fewer managers and hierarchical levels than a tall organization, so a flat organization’s managers possess relatively more authority and responsibility than a tall organization’s manager

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

In other words, the organization should be keep as flat as possible, and managers should be evaluated for their ability to control organizational activities with the smallest number of managers possible An organization with a flat structure will experience fewer communication, motivation and cost problem that will a tall organization The only reason why a organization should choose a tall structure over a flat structure is that needs a high level of direct control or personal supervisor over subordinates

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

Organizations that become too tall inevitably experience problems Nevertheless,

an organization that is growing must control the activities of newly hired personnel; how can an organization avoid becoming too tall? One way is by increasing managers’ span of control If the span of control of each manager increases as the number of employee increase, then the number of manager or hierarchical levels does not increase in proportion to increases in the number of employees

Figure 2.2 Spans of control

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 hierarchy of authority designed by management that allocates people and resources to organizational task and roles is a blueprint 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 interact informally on the job Moreover, many of the rules and norms

that employees use to perform their task emerge out of informal interactions between people and not from 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 be unintended

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 is a difficult and challenging task Managers have

to 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 redesign the organization in order to obtain the advantages and anticipate and minimize the problems of whichever structure they choose An organization that is in control of it structure has an important competitive advantage over one that is not Many organizations ignore the coordination problems inherent in the organizing process Too often, an organization waits until it is already in trouble (in decline) before attempting 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 experiencing

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

CEO

Production Department

Program Department

Media

Department

Account Department Admin

This model provides people with the opportunity to learn from another and become more specialized and productive When people with skills in common are assembled into a function group, they can learn the best way to solve the problems, or the most efficient techniques for performing a task, from one another

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 each other over extended time periods develop norms and values 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 with different customer groups, or to handle growth into new regions7

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

CEO

Production Department Program

Department Media

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

The structure that organizations most commonly adopt to solve the control problems that result from producing many different kinds of products in many different locations for many different type of clients is the divisional structure A divisional structure groups functions according to the specific demands of products, markets, or customers The goal behind the change to 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 problem to be solved:

 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

 If the control problem is due to the number of locations in which the organization products and sells its products, the organization will divide its activities be region and use a geographic structure

 If the control problem is due to the need to service 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, 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

Figure 2.5 Product division structure

10 Gareth R Jones, “Organizational Theory, Design, and change”,Prentice Hall, 2004

Vice President Financial Vice President

Research & Development Vice President

Sale & Marketing

Vice President Material

Soup Division

Meat Division

Fish Divison

Baked Goods Division

PDM

Central support functions

Product Division Manager

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

Support functions Support functions Support functions Support functions

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 structure

Figure 2.7 A Multidivisional structure in which division has a

different structure

CEO

Senior Vice President Research & Development Senior Vice President

Financial Senior Vice President

Marketing

Senior Vice President Materials Corporate Headquarters Staff

Functional Groups

Functional Groups Functional Groups

Functional Structure Product Division Structure

Matrix Structure

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

CEO

Senior Vice President Research & Development Senior Vice President

Financial Senior Vice President

Product Division

Product Division

Product Division

Functions

Product Development

Teams

PTM : Product Team Manager

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

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

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

Figure 2.9 Geographic structure

Central support functions CEO

Regional Operations

Regional Operations

Regional Operations Regional

Figure 2.10 Market structure

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

Corporate Division Consumer Division

Commercial

Central Support Functions

1.3.8 Matrix structures group activities by function and product They are a special kind of structure that is available when an organization needs to deal with new or technically sophisticated products in rapidly changing markets.13

Figure 2.11 Matrix structure

CEO

Production team Product manager Vice president

13 Jim Brickley, Clifford Smith, Jerry Zimmerman and Janice Willett, 2002 Designing Organizations to Create

Value: From Strategy to Structure New York: McGraw-Hill Gareth R Jones, “Organizational Theory,

Design, and change”,Prentice Hall, 2004

An organization with a matrix structure is differentiated into whatever functions the organization needs to achieve its goals The organization itself

is very flat, having minimal hierarchical levels within each function and decentralization authority Functional employees report to the heads of their respective functions but do not work under their direct supervision Instead, the work of functional personnel is determined primarily by membership in one of several cross-functional product teams under the leadership of a product manager The members of team are called two-boss employee 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

o Team members in a production team structure have only one boss: the product team manager Team members in a matrix structure have two boss – the product manager and the functional managers

o In the matrix structure, team membership is not fixed Team members move from team to team, to where their skills are most needed

Advantage of matrix structure:

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

ii) It opens up communication between functional specialist and provides an opportunity for team members from different functions to learn from one another and develop their skills iii) The matrix enables an organization to maximize it use of skilled professionals, who move from product to product as needed

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

Disadvantage of matrix structure:

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

ii The lack of a clearly defined hierarchy of authority can also lead to conflict between functions and product teams over the use of resources

iii Matrix structures have to be carefully managed to retain their flexibility

1.3.9 Network structures are formed when an organization forms agreements or contracts with other organizations to perform specific functional value creation activities

Advantage of network structures:

- To the degree that an organization can find a network partner that 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

to perform specific value creation activities, it avoids the high bureaucratic cost of operating a complex organizational structure

- A network structure allows an organization to act 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 environment

CHAPTER SUMMARY

If an organization is to remain effective as it changes and grows with its environment, managers must continuously evaluate the way their 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

- How to strike an appropriate balance between differentiation and integration and use appropriate integrating mechanisms

- How to strike an appropriate balance between the centralization and decentralization of decision-making authority

- How to strike an appropriate balance between standardization and mutual adjustment by using the right amounts of formalization and socialization

Designing organizational structure is a difficult and challenging task Managers have

to 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

- All organizations begin as functional structures A functional structure

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

- After the startup time, 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 Each these models has its own particulars and was designed base on the real situation of each company

After review theory, we will

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

- 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

CHAPTER 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

Generally speaking, advertising is the promotion of goods, services, companies and

ideas, usually by an identified sponsor Marketers see advertising as part of an overall promotional strategy Other components of the promotional mix include publicity, public relations, personal selling and sales promotion14

2.1.1 History15

In 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, advertising expanded to include

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

These early print ads were used mainly to promote books (which were increasingly affordable) and medicines (which were increasingly sought after as disease ravaged Europe 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 promoting all kinds of goods The success of this advertising format 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 modern, more scientific approach in which creativity was allowed to shine, producing unexpected messages that made advertisements interesting to read The Volkwagen ad campaign featuring such headlines as "Think Small" and "Lemon" ushered in the era of modern 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 part 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, musical stage shows, subway platforms and trains, elastic bands on disposable diapers, stickers on apples in supermarkets, the opening section of streaming audio and video, and the backs of event tickets and supermarket receipts Any place an "identified" sponsor pays to deliver their message through a medium is advertising Covert advertising embedded in other entertainment media is known as product placement16

The TV commercial is generally considered the most effective mass-market advertising format and this is reflected by the high prices TV networks charge for commercial airtime during popular TV events The annual Super Bowl football game

in the United States is known as much for its commercial advertisements as for the game itself, and the average cost of a single thirty-second TV spot during this game has reached $2.3 million (as of 2004)

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

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

16 William D Wells, Sandra Moriarty and John Burnett, 2000 Advertising : Principles and Practice (3rd Edition)

booster rockets and the International 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 friend", "sell it by zealot"), spreading buzz, or achieving the feat of equating a brand with a common noun ("Hoover" = "vacuum cleaner", "Kleenex" = "tissue") these must provide the stuff 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 (rp) or the more accurate target rating point (trp) 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 each media outlet in a particular moment

in time The difference between the two is that the rating point refers to the percentage to the entire universe while the target rating point refers to the percentage

to a particular segment or target This becomes very useful 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 ages of 25 to 45 making it a less desirable location to place an ad for an advertiser looking for this particular demographic

2.1.3 Objectives

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

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

In general, advertising is used to convey availability of a "product" (which can be a physical product, a service, or an idea) and to provide information regarding the product17 This can stimulate demand for the product, one of the main objectives of

advertising More specifically, there are three generic objectives of advertisements: communicate information about a particular product, service, or brand (including announcing the existence of the product, where to purchase it, and how to use it), persuade people to buy the product, and keep the organization in the public eye (called institutional advertising) Most advertising blends elements 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 frequently 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 use information, positioning or repositioning, and organizational image improvement

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

communicate are product details, benefits and brand information Advertising

17 Jon Steel, 1998 Truth, Lies and Advertising: The Art of Account Planning New Jersey: Prentice Hall

usually 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 there is more branding occurring in advertising This branding attributes a certain personality or reputation to a brand, termed brand equity, which is distinctive from its competition Generally, brand equity 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 stimulate demand for a product and build brand equity and brand franchise When enough brand equity 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 prevalent in people's mind (called mind share), that it is used to describe the whole category of products This phenomenon is sometimes known as "hyper branding." Kleenex, for example, can

distinguish itself as a type of tissue or a label for a category of products That is, it is

frequently used as a generic term One of the most successful firms to have achieved

a dominant brand franchise is Hoover, whose name was for a very long time synonymous with vacuum cleaner (and Dyson has subsequently managed to achieve similar status, having moved into the Hoover market with a more sophisticated model of vacuum cleaner) The strength of a brand franchise can be established to greater or lesser degrees in various markets In Texas, for example, it is common to

hear people refer to any soft drink as a Coke, regardless of whether it is actually

produced by Coca-Cola or not (more accurate terms would be 'cola' or 'soda')

A legal risk of the dominant brand franchise is that the name can become so widely accepted that it becomes a generic term, and loses trademark protection Examples

include "escalator", "aspirin" and "mimeograph"

2.1.4 Future of Advertising industry

With the dawn of the internet 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 to advertise in the movie 'The Matrix: Reloaded', which as a result contained many scenes in which Cadillac cars were used From some points of view the whole movie could be viewed as an ad, but since

it was entertaining, the public desired to view it Each year, greater sums are paid to obtain a commercial spot during the Super Bowl Companies attempt to make sure these commercials are very entertaining and many members of the public desire to watch them

The advertising community has not yet succeeded in making their ads available to the public Since the dawn of interesting and entertaining (desirable) advertising some 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 used the Internet 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 television 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 freely and even distribute them to others - by that classic method, word-of-mouth

Potentially (this has not been achieved to any degree) we could see the advertising community releasing quantities of free 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 their own creations

2.2 Organization structure of World advertising industry

2.2.1 Types of Ad Agencies18

Since ad agencies can range in size from a one- or two-person operation to large organizations with over 1,000 employees, the services offered and functions performed will vary This section examines the different types of agencies, the services they perform for their clients, and how they are organized

2.2.1.1 Full-Service Agencies

Many companies employ what is known as a full-service agency, which offers its

clients a full range of marketing, communications, and promotions services, including planning, creating, and producing the advertising; performing research; and selecting media A full-service agency may also offer non advertising services such

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

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

2.2.1.2 Account Services

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

in the agency 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 department whose function is to

gather, analyze, and interpret information that will be useful in developing advertising for their clients This can be done through primary research—where a study is designed, executed, and interpreted by the research department—or through the use of secondary (previously published) sources of information Sometimes the research department acquires studies conducted by independent syndicated research firms or consultants The research staff then interprets these reports and passes on the information to other agency personnel working on that account The research department may also design and conduct research to pretest the effectiveness of advertising the agency is considering For example, copy testing is often conducted

to determine how messages developed by the creative specialists are likely to be 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 communicate the message Since most of the client’s ad budget is spent