JCDecaux s Marketing Strategy In Mainland China

Transcription

1 JCDecaux s Marketing Strategy In Mainland China Ada, GONG Siyao Jessie, ZHU Yingjie Samantha, LIU Si Susy, SU Qianxin A Project Submitted in Partial Fulfillment of the Requirements For the Degree of MSocSc in Media Management Supervisor: Dr. David KO School of Communication and School of Business Hong Kong Baptist University Hong Kong May 2013

2 Acknowledgements We would like to give profound thanks to our project supervisor Dr. David Ko, for his invaluable advice and comments, as well as enduring support throughout the project. It is a great chance to obtain insight into JCDecaux China market, and his instructions and guidance have made it a truly rewarding experience. Also, Thanks to our parents for their love and support of our study in Hong Kong Baptist University. We are here to acknowledge that this project survey and strategy recommendations are our own original work and are carried out by ourselves under the supervision of Dr. Ko. Students Names: GONG Siyao, LIU Si, SU Qianxin, ZHU Yingjie Signatures: MSocSc in Media Management School of Communication Hong Kong Baptist University Date: 1

3 Plagiarism Declaration Form Students Names: GONG Siyao, LIU Si, SU Qianxin, ZHU Yingjie Students Numbers: , , , Title of Project: JCDecaux s Marketing Strategy in Mainland China Submission Date: May 6 th, 2013 Declaration: We have read the relevant sections on Plagiarism provided in the Handbook for Graduation Project and observed the standards of conduct. We are fully aware of the consequences in the event of plagiarism. We declare that, to the best of my knowledge, this project represents our own work and all sources have been properly acknowledged, and the Project contains no elements of plagiarism. We further declare that the Project has not been previously included in a thesis, dissertation or report submitted to this University or to any other institution for a degree, diploma or other qualification. Students Signatures: Date: 2

4 Executive Summary JCDecaux is a multinational French corporation based in France, which is well known for its outdoor advertising such as street furniture, transport advertising and billboard. It has a history of nearly 50 years and over the years it has expanded aggressively around the globe. It currently presents in more than 55 different countries, and its advertising reaches 175 million people each day. Nowadays JCDecaux is the first largest outdoor advertising specialist around the globe, and also No.1 worldwide for airport advertising with concessions in 176 airports. The potentials and opportunities in Mainland China is huge, as a result, JCDecaux set foot in Mainland China market in 2005 and soon got hold of important resources in first-tier cities in China. The China market has become the world's third largest market for JCDecaux after France and Britain. And JCDecaux keeps performing excellent in the Chinese outdoor advertising industry. Basically, the report focuses on JCDecaux s business strategy in Mainland China market, aiming at the question what is JCDecaux s unique character to make it successful in China as well as the rest of the world. Analyses and evaluations will be provided to examine JCDecaux s current performance and generate related recommendations. During the research, many theories assist a lot in analyzing JCDecaux s business model, such as The Comparative Advantage Theory, Linder Hypothesis, The Product Life Cycle Theory, The New Trade Theory, FDI Strategic Motivations, The OLI Theory and so on. Through further investigations of questionnaire and interview, opinions of Chinese 3

5 audiences about JCDecaux s performance are examined. Both primary research and secondary research are used in the project to insure the analysis is comprehensive. Finally, the report concludes that JCDecaux has an idiosyncratic business model of Location + Clients = Business, which guarantees its business can be risk-free in Mainland China, and even around the world. In addition, the report also provides special and interesting findings include 1) the relationship between JCDecaux and it clients can be described as Global Market, Single Customer, and they together form a symbiotic market; and 2) the unfavorable industrial factor implies that the best days of luxury goods in China has gone. 4

6 Table of Contents Chapter 1. Introduction Objectives of The Study Structure of Paper Methodology... 9 Chapter 2. Advertising Industry in Mainland China Environmental Analysis Advertising Industry in Mainland China Outdoor Advertising in Mainland China Chapter 3. JCDecaux in Mainland China Introduction SWOT Analysis Current Performance Chapter 4. Literature Review Chapter 5. Proposition Chapter 6. Questionnaire Analysis Rationale of Questionnaire Questionnaire Sample Basic Result Analysis Product Evaluation (Billboard Evaluation & Consumer Cognition) Cross Data Analysis Chapter 7. Interview Analysis Introduction to the interviewees Interview Analysis Chapter 8. Conclusion Special Findings Conclusion Recommendation for JCDecaux Limitation and Further Study Reference

7 Appendix Appendix I Competitors of JCDecaux in Mainland China Appendix II Questionnaire

8 List of Figures and Tables Figure 1 Gross Domestic Product and its growth rate in Mainland China ( ) Figure 2 Advertising expenditure in Mainland China (2012) Figure 3 Chinese advertising market Figure 4 Revenues of top 10 outdoor advertising companies in Mainland China (2011) Figure 5 JCDecaux s revenue growth by segment (2012) Figure 6 JCDecaux s revenue growth by region (2012) Figure 7 JCDecaux s exposure to fast-growing countries (2012) Figure 8 JCDecaux s diversified client base (2012) Figure 9 JCDecaux s competitive landscape (2012) Figure 10 Gender of respondents Figure 11 Ages of respondents Figure 12 Regions of respondents Figure 13 Education levels of respondents Figure 14 Occupations of respondents Figure 15 Income levels of respondents Figure 16 Respondents preferred advertising forms Figure 17 Respondents notice rate towards outdoor advertising in airports Figure 18 Respondents impressions about outdoor advertising in airports Figure 19 Influences of the outdoor advertising in airports Figure 20 Respondents preferred contents of advertising Figure 21 Respondents interested consumption field Figure 22 Gender and attitude towards JCDecaux s ads Figure 23 Education and attitude towards JCDecaux's ads Figure 24 Age distribution of who appreciate JCDecaux's ads Figure 25 Occupation and attitude towards JCDecaux's ads Figure 26 Age-Trust analysis of JCDecaux's ads Figure 27 Attitude to JCDecaux's ads among middle-age group Figure 28 Income-Trust analysis of JCDecaux's ads Figure 29 Model of traditional advertising activities Figure 30 Global advertising activities of JCDecaux Table 1 Forms of outdoor advertising Table 2 Distribution of billboard evaluation (percentage) Table 3 Distribution of mainland audiences recognition and habits towards

9 Chapter 1. Introduction 1. Objectives of The Study Since late 1990s, as the Chinese government loosened up the restrictions and welcomed foreign corporations to set their branches, international outdoor advertising companies flushed into China. Most of them took China as their new largest market, for China s steadily growing economy and stable politic environment. This project tries to analysis the current situation of outdoor advertising industry in Mainland China and conduct a detailed study of JCDecaux a French-based international outdoor advertising company, in terms of its current business model, existing market and possible future development for its expansion. Meanwhile, we believe that JCDecaux has an idiosyncratic character in running its business, which might help the outdoor adverting industry to find a suitable way to go in the future. Also, the project will further investigate the behaviors of Chinese outdoor advertising audiences, including their habits and preferences, so as to provide solid information for JCDecaux and other outdoor advertising companies in China, for better improving business strategies to adapt to Chinese situation. 2. Structure of Paper The thesis consists of eight chapters. A brief introduction of the topic will be provided in Chapter 1. In Chapter 2, there will be a macro view of advertising industry in Mainland China. 8

10 Meanwhile, the current situation of outdoor advertising in Mainland China will be mentioned. An analysis will be conducted to examine JCDecaux in Mainland China in Chapter 3, including SWOT analysis and current status. Chapter 4 and 5 will mainly focus on the related literature review and proposition respectively. Chapter 6 will provide a detailed analysis on our questionnaire, from where we can better understand Chinese outdoor advertising consumers preferences and have an in-depth understanding of the effectiveness of outdoor advertising. Interview analyses will be conducted in Chapter 7, and from both a micro perspective, the idiosyncratic character of JCDecaux s business strategy is revealed. Last but not least, Chapter 8 will conclude the findings in this project and provide suggestions for JCDecaux s future development. 3. Methodology Primary data will be collected by online and offline questionnaires. Main target group is male and female aged 15 and above, living in first tier and second tier cities of Mainland China, such as Beijing, Shanghai, Guangzhou, Shenzhen, and Hangzhou. Google Doc online survey system and paper questionnaires are used in the survey. As lack of accesses to business insiders, the interview will be mainly secondary data but still answers most of our questions. 9

11 Chapter 2. Advertising Industry in Mainland China 1. Environmental Analysis Market environment has great impacts on a company s development. Basically, a PEST analysis is conducted to see what the environmental factors including politics, economy, society and technology are like. Through PEST analysis, a company can understand the environment clearer and operates its business with accurate goals. a) Political factors The political environment of Mainland China is relatively steady. This offers a stable environment to all the companies to develop its business without being disturbed. The economic system, legal system, etc. are suited for the conditions of Chinese market, making sure that all the business operations are in order. Since 1980s, restraints on foreign trades were relaxed and joint ventures are encouraged by the Chinese government. After joining in the WTO, China has established a friendly and positive relationship with countries around the globe. Meanwhile, Chinese government reduced some of the tariffs and opened more markets to the world. These favorable factors improved trading environment and attracted a large number of foreign companies/investors to relocate their businesses in Mainland China. However, the preferential policies for foreign-funded enterprises have been cancelled. The new Enterprise Income Tax Law and its Implementing Regulations, which came into force in Jan.1, 2008, have changed the situation. Both domestic companies and 10

12 foreign companies have the same income tax rate 25%. Besides, many other preferential policies, such as free Land Use Tax and Urban Maintenance and Construction Tax, have been cancelled. b) Economic factors The economy in Mainland China develops well in past 10 years. As Figure 1 shows, GDP is rising in recent five years ( ), and the blue line shows its growth rate. In 2012, GDP of China is RMB 51,932.2 billion, which is higher than that in any year from 2008 to (National Bureau of Statistics of China, 2013) The steadily growing Chinese economy contributes an advantage for companies to enter and develops its business in Chinese market. Chinese people have more purchasing power to buy what they want. (See Figure 1) 11

13 Gross Domestic Product and its growth rate in Mainland China ( ) 600,000 35% 500, , ,322 30% 400, , , ,513 25% 20% 300,000 15% 200, , % 9.2% 10.4% 9.3% 7.8% 10% 5% GDP (hundred million) Growth Rate (%) 0% Figure 1 Gross Domestic Product and its growth rate in Mainland China ( ) c) Social factors (Source: National Bureau of Statistics of China, 2013) The population in China has reached billion at the end of 2012, which ranks the first in the world. Among them, the number of people between 15 and 59, who are the main consumers of Chinese market, is million, occupying 69.2% of the total. (National Bureau of Statistics of China, 2013) Meanwhile, the popularization of nine-year-compulsory education and the development in higher education broke down the language barriers, as a result, more people are able to read and write English, which made knowing and accepting international brands possible for them. 12

14 Chinese people gradually fall into the habit of pursuing fashion in their daily life, especially updating their clothes and electronic products. It is a pleasure for people to spend money on new products, so that they can enjoy beauty, fashion and the convenience of high-tech. Additionally, environmental protection and sustainable development were stressed. So people prefer companies with environmental friendly products and caring about the social responsibilities. d) Technological factors Because of the development of traffic technology, there are more high-speed rails and airports. People have more choices of transportation when travelling. The application of Internet set up a platform for the public to get access to the world. Internet, a new medium, turns to play a more important role in people s daily life. More functions are offered through the Internet, which make life easier and more convenient. More electronic display screens are developed such as LCD, LED, etc. These materials make the screen clearer and brighter, but energy-saving and environmental friendly. 2. Advertising Industry in Mainland China Since the Reform and Open Up Policy implemented in China in 1979, Chinese economy has been booming all the time. Advertising industry, which is impacted by economy significantly, develops fast during these years. Take 2012 as an example, the 13

15 advertising expenditure in China is 42.6 billion USD. Compared with 2011, we can see a 13% rise. There is an estimated data that the expenditure will keep increasing in the coming years. (See Figure 2) Advertising Expenditure in Mainland China (2012) 70 16% 60 14% % 13.0% % 11.0% 10.0% 10.0% 12% 10% 8% 30 6% 20 4% 10 2% GDP (billion USD) Growth Rate (%) 0% Figure 2 Advertising expenditure in Mainland China (2012) (Source: Tianto Info Consulting, 2013) In Chinese advertising industry, various kinds of advertising develop at the same time. According to the data of World Executive Data Base of 2012, TV commercial, as the traditional advertising media, is still occupied the most part of the whole advertising industry. Internet advertising ranks second as a new medium. Newspaper and outdoor advertising are less popular than TV and Internet, they rank the third and the forth, respectively. The other kinds of advertising media, like broadcasting, magazines and 14

16 cinemas only occupy a few part of the whole market. (See Figure 3) Chinese Advertising Market Newspaper 18% Outdoors 11% Broadcasting 4% Magazine 2% Cinema 0.1% Internet 28% TV 37% TV Internet Newspaper Outdoors Brocasting Magazine Cinema Figure 3 Chinese advertising market (Source: World Executive DataBase,2012) 3. Outdoor Advertising in Mainland China Outdoor Advertising, or OD Advertising, is a continuous visual advertising for unspecific audience in a specific place during a period of time. (Fan Zhiyu & Fan Zhen, 2003) With the development of technology these years, the media develops to various forms, such as LED screens on squares and train stations. So it is more appropriate to call outdoor advertising as Out-of-home (OOH) Advertising. (Wu Bolin, 2010) In detail, outdoor advertising nowadays can be categorized as Table 1. 戶外廣告活動 目的劃分 非營利性 戶外廣 告 ( 公共服務性 廣告 ) 政府廣告社會活動通知教育宣傳尋 人啟事 營利性 戶外廣告 ( 商業性廣告 ) 商業服務性 質 生活中常 見 大各種商品廣告 企業形象廣告 15

17 商業貿易廣告等 文化娛樂性 質 電影 戲劇 旅遊 展覽廣告等 傳播模式流程 平 行的傳播模式 基本傳播模式 有各式 POP 廣告牌 視頻媒體 藍 牙 紅外線廣告等 S-R (Stimulus Response) 模式 戶外顯 示屏 主要設置在城市中的公共環境 建築物 立 戶外廣告傳播 放範圍劃分 動態廣告 靜態廣告 樓宇電視路牌燈箱 交橋公路兩旁的 大 立柱和塔鐘等上的 戶外廣告中型 戶外廣告, 設置的區域 比較廣泛 小型 戶外廣告, 設置在城市公共服務設施上 戶外廣告設置形態劃分 戶外廣告藝術形式劃分 戶外廣告傳播媒體劃分 落地式廣告設施附著式廣告設施藝術裝飾型美化結合型遮擋利 用型地 面上 戶外廣告建築物構築物上交通 工具 主要是指從地 面起以單個或多個柱體以及 用鋼結構等材料 支撐的廣告看板 燈箱 顯 示屏 ( 牌 ) 霓虹燈或其他造型廣告主要指附著於建築物 構築物及公共設施和移動交通 工具等設置的廣告看板 燈箱 霓虹燈或其他造型廣告廣告畫 面清晰, 色彩鮮艷明快, 豎 立於城市中具有很強的視覺衝擊 力, 創作設計過程中可充分發揮想像 力和創造 力發揮想像 力和創造 力與環境巧妙結合廣告看板 燈箱 霓虹燈或其他造型廣告附著於建築物 構築物及公共設施移動交通 工具 Table 1 Forms of outdoor advertising (Source: Ge Lulu, 2012) The outdoor advertising industry has witnessed the high-speed development in China during these years. According to the data of (Nanjing) Outdoor Advertising Forum of China, the total revenue of outdoor advertising of China in 2012 is RMB 27.6 billion. (Huang Hongfang, 2012) In addition, the huge amount of Chinese population gives outdoor advertising market more targeted consumers. Outdoor advertising is popular because of its unique advantages. Advertising customers care about the cost of targeting per thousand people, and the cost of 16

18 outdoor advertising on targeting one thousand is lower than that of other traditional media. Taking advantages of its locations, these advertising can be seen all day long and all the passersby are the targeted audiences. So the audiences of outdoor advertising are many more. Especially with the help of new materials for advertising, they broaden outdoor advertising s carriers. For example, LED and LCD technologies improve the quality of the advertising. It is true that China is a great market for outdoor advertising, but some shortcomings should be avoided. First, the advertising should be coordinated with buildings and streets. Second, it should be humanistic. Third, it should be full of regional features and characteristics. (Ge Lulu, 2012) Although all the advertisings are designed for business purpose, following these rules are helpful to get closer to the audiences. With the development of advertising industry in China during these years, many Chinese companies start to run outdoor advertising business, while many international advertising magnates come to China to develop their outdoor advertising business. In Mainland China, outdoor advertising competition is fierce, and most of the powerful outdoor advertising companies locate in big cities. According to the top 100 ranking list of revenues of outdoor advertising companies in China, eight of the top ten companies come from Shanghai. The other two come from Beijing and Hainan, respectively. Figure 4 shows the revenues of the top10 outdoor advertising companies in China in The No.1 company is Emerging Media, whose major outdoor business is the bus stop advertising in Shanghai. The Focus Media and Kinetic Media rank the 17

19 second and the third. Focus media mainly focuses on LED advertising, while Kinetic is a comprehensive outdoor advertising company operating various kinds of outdoor adverting business. Among the top 10 companies, only Kenitic Media (No.3) is an international company, whose headquarter locates in London, UK. STDecaux is a joint venture company, which is built by Shanghai ShenTong Group and JCDecaux. The other companies are all set up in Great China, including Mainland China and Hong Kong. (See Figure 4) Revenues of Top 10 Outdoor Advertising Companies in Mainland China (2011) Asiaray New Focus Media STDecaux Dingxiang Media DAHE Media ADSHEL Beijing Capital Airport , , Kinetic Focus Media Emerging Media 2, , , Figure 4 Revenues of top 10 outdoor advertising companies in Mainland China (2011) (Source: China Advertising Association Net, 2011) 18

20 Chapter 3. JCDecaux in Mainland China 1. Introduction As before mentioned, outdoor advertising industry in Mainland China was booming in past years. And thanks to the rapid development of transportations, China has become an attractive market for world-class outdoor advertising companies. A. From Hong Kong to Mainland China Back in 1976, JCDecaux set up a subsidiary named Pearl & Dean in Hong Kong, through which JCDecaux could on one hand re-enforce its position in Asia and, on the other hand, keep an eye on Mainland China for a perfect chance to get in. Before JCDecaux set foot in Mainland China, the top four outdoor advertising companies include Media Nation, Media Partners, TOM Outdoor and Whitehorse ADSHEL. Among these companies, Media Nation and Media Partners were the only two capable of operating cross-cities transportation advertising and hold considerable market share in metro advertising. JCDecaux found too many overlaps existing between its business and these two giants in China; therefore it paved its way in 2005 by acquiring them. As a result, JCDecaux got hold of a considerable transportation advertising market 80% in subway and 40% in bus in Beijing, Shanghai, Nanjing and Guangzhou. As well as M&A, JCDecaux expanded its market in Mainland China by developing its advertising platforms, including Shanghai International Airport (SIA) and Tianjin Metro. Ever since, the Chinese market has become the world s third largest market for 19

21 JCDecaux. Up to now, JCDecaux s business spans 34 cities in Great China, covering airport, metro, bus, and campus advertising. B. Target audience and positioning in Mainland China Demographically, JCDecaux s advertisements targets mostly frequent users of public transportations, with middle to high incomes, who have disposable money for extra purchasing. Additionally, from a psychographic perspective, they tend to show more interests to international brands and enjoy delicacy. To better attract audiences with the above traits, JCDecaux positions itself as advertising professional that carries French origin and showcasing the high-end advertisements to high-end audiences. While French generally represents high quality and excelsior, JCDecaux enjoys much of this reputation. In Mainland China, large amount of its advertisements exposes in international airports and metro stations of central business districts in first-tier cities, where many target audiences may encounter. Additionally, JCDecaux sets up Quality, Keeping our word, and Openness as its core value of dealing with multi-national markets. Thus, a decent and responsible image is built in Mainland China. C. Five Forces Analysis Michael Porter's (1980s) Five Forces Model includes three forces from horizontal competition, namely the competitive rivalry, the threat of new entrants, and the threat of substitute products. And two forces from vertical competition the bargaining 20

22 power of suppliers and the bargaining power of buyers. a) Competitive rivalry As illustrated in Chapter 2, JCDecaux is now facing intense competition in Mainland China market. Both local and foreign outdoor advertising companies are trying to expand their business in the market. Though competitions are fierce, JCDecaux s leading status in China is temporarily difficult to shake. b) Threat of new entrants The existing players of the outdoor advertising industry in Mainland China appear to be quite competitive and aggressive, which lowers the attraction to new entrants. Especially when concerning the high entry barriers in terms of capital, government regulations, etc. As a result, the threat of potential new entrants is not high. c) Threat of substitute products JCDecaux is not facing much threat of substitutes at present. Existing substitutes for outdoor advertisements could be TV ads, websites ads and flyers etc. However, they are definitely not aiming to replace outdoor advertising. On a different note, since the industry is crowed enough, it is possible that new ways of advertising would be invented and take over outdoor advertising, but this would take a relatively long span of time. d) Bargaining power of suppliers JCDecaux s suppliers are mainly the factories that provide LED and LCD screens, billboard materials and printing service. Since JCDecaux purchases in bulk and it is in 21

23 a leading position in the outdoor advertising industry, suppliers won t enjoy high bargaining power when negotiating with JCDecaux. e) Bargaining power of buyers Most of JCDecaux's clients are well-known international corporations (groups) such as LVMH and Porsche, who care much about their brand images and willing to pay a premium for better advertising locations. JCDecaux obtains remarkable locations due to its excellent relationship with Chinese local governments. Since JCDecaux gets what other outdoor advertising companies cannot get, the bargaining power of its buyers are relatively low. To conclude, the outdoor advertising industry in Mainland China is medium high competitive. And JCDecaux, being one of the leading companies for seven years in this industry, is still doing well and likely to generate more competitive advantages if it makes full use of its resources. 2. SWOT Analysis The SWOT Analysis is applied here to identify the internal resources like strengths and weaknesses, and the external opportunities and threats of JCDecaux in order to help it to better allocate its resources and prepare for its future strategy developing. A. Strengths a) Long history and rich experience JCDecaux is now the No.1 outdoor advertising company in the world with over 40 22

24 years of experience. It had accumulated rich experience in outdoor adverting designs and implementations. What s more, solid relationships with large amounts of clients were built up during this period. b) Good brand image and French identity JCDecaux is well recognized around the globe with its excellent work and enjoys fairly good reputation, which comes with various prizes in the advertising industry. JCDecaux originates from France and so are most named luxury brands like LVMH and Yves Saint Laurent. JCDecaux speaks the same language as its major clients and shares similar culture background, which makes it easier for both sides to communicate and get things done. This kind of special bond with super luxury brands creates competitive advantages for JCDecaux, comparing with other Chinese advertising companies. c) Excellent product and high-quality service JCDecaux provides high-quality products and services to both clients and local advertising spots. Its local divisions strictly follow the quality standard set by headquarter, which guarantees that every piece of its work is qualified. Also, researches and analyses are usually conducted to examine the market, and valuable suggestions will be given to clients. d) Economy of scale The economy of scale can be illustrated in two dimensions. Firstly, according to information on the Internet, we assumed that JCDecaux is benefiting from economy 23

25 of scale in terms of producing or purchasing billboards. A company named GENSIN (China) states that it is the only supplier for JCDecaux s billboard material in world region. And by producing (or purchasing) large volume of materials from one or limited suppliers, JCDecaux is able to lower the fixed cost of each piece. Secondly, JCDecaux has access to advertise in nearly 176 airports around the world, thus far it offers something like package service to international clients. That means if LVMH wants to do global advertising, it is able to get a discount from JCDecaux if it spread the ads to 176 airports rather than just a few. Although the total amount of cost will increase, the unit price of advertising in each airport is lower. e) Strong relationship with local government JCDecaux is an expert in Guanxi it knows just how to deal with local governments. Winning an exclusive 15-year contract with one of the busiest airports in Mainland China for the operation and management of all outdoor advertising isn t a piece of cake. However, JCDecaux managed to do so by figuring out the best way to approach to local governments. Lately, it just won an 8-year advertising contract for Shanghai metro TV Network and extends its partnership with Shanghai metro. B. Weaknesses a) Less policy support from the Chinese government Even though JCDecaux landed on Mainland China successfully by acquiring two advertising giants then, it had to win the trust of the Chinese government by joint venture with local companies. Local government sets up some regulations regarded to 24

26 joint venture companies in order to protect local corporations. These regulations restrict JCDecaux s expansion in Chinese market. For example, according to the regulations on M&A, the registered capital of foreign investors should not be less than 25%. That means JCDecaux has less cash flow to operate after they set aside the large amount of registered capital. b) Low efficiency result from culture difference Like many joint venture companies in the world, culture difference is something that cannot be neglected. In a JCDecaux s joint venture company in Mainland China, for instance, French employees occupy administrative positions, especially in financial and marketing departments, because they need to frequently connect with headquarter and give strategic orders to local divisions. While Chinese staffs usually do the implemental work because they know the local culture and language better. French superiors tend to speak fluent French but poor Chinese and the Chinese staffs are in the opposite situation. As a result, misunderstandings are likely to happen and reduce efficiency. C. Opportunities a) Economic growth China s economy is performing well and disposable incomes of urban residents keep rising in recent years. With more money in hand, Chinese people show increasing interests in travelling abroad, which brings more audiences to the airport and being exposed to JCDecaux s advertising. The CPM (cost per thousand) might thus fall in 25

27 the coming future. b) More public facilities being built Chinese government attached increasingly huge importance to transportation system development. As reported, more terminals are being built in busy airports to meet the needs of growing passenger volume. Specifically, China has approved 25 urban rail projects and the construction of 82 new airports. It is of great possibility that this would directly bring more opportunities for JCDecaux to occupy Chinese advertising market. c) New technology The combination of traditional media (print ads) and visual media (interactive ads) has become a new trend in advertising industry. As an innovator in outdoor advertising industry, JCDecaux is more sensitive to the latest technology and willing to test them on their next creation. D. Threats a) Europe s economic crisis Europe s economic crisis affected many of JCDecaux s clients as reported, and the crisis is not over yet. During this period, advertisers may continue to cut their advertising budgets and withdraw some of the advertisements in world region. Thus it is possible that it will continually be a threat to JCDecaux s revenue in the long run. b) New principle addressed by new leader in China Recently, a whole new leader team was elected in Mainland China. Right after 26

28 Chairman Xi Jinping took up the post, he addressed the importance of defeating corruption and abandoning luxury living habits. Consequently, officials cut their spending on luxury products. In the long run, it will probably bring negative influence on the outdoor advertising industry, in a way that the government may prohibit or restrict the advertising of luxury products in public. And that would be an unimaginable loss for JCDecaux, whose revenue comes from mostly luxury brands. 3. Current Performance A. Revenue According to the 2012 Annual Results of JCDecaux, the revenue growth of transport division increased dramatically in both reported and organic terms. For JCDecaux is expanding its transport advertising business aggressively around the world. Take China market for instance, from January 2012 till now, JCDecaux has signed medium-term (5 to 8 years) contracts with Chengdu, Ningbo, and Shanghai governments covering bus shelter, metro, and airport outdoor advertising business. Transport is going to be JCDecaux major focus in the coming future. (See Figure 5) 27

29 Figure 5 JCDecaux s revenue growth by segment (2012) (Source: JCDecaux 2012 Annual Results) Influenced by Europe s economic crisis, revenue dropped in those affected areas during However, the revenue growth in Asia-Pacific and rest of the world was significant. From which we assume that the BRICS (Brazil, Russia, India, China and South Africa) has become JCDecaux s next strategic target. (See Figure 6 & 7) 28

30 Figure 6 JCDecaux s revenue growth by region (2012) (Source: JCDecaux 2012 Annual Results) Figure 7 JCDecaux s exposure to fast-growing countries (2012) (Source: JCDecaux 2012 Annual Results) Among JCDecaux s clients, what we found interesting is the statement in 2012, 29

31 strong spending increases from Personnel Care & Luxury goods (+20%). As most categories of clients slightly increased their advertising budget in outdoor advertising by 0.1% to 0.4%, Personnel Care & Luxury Goods witnessed a 1.4% increase. Connected with the above figures, revenue growth in regions, we assume that corporations in this category sloped their attention to Asia-Pacific market, for the relatively favorable economy environment and increasing purchasing power. However, Telecom & Technology experienced a sharp decrease of 1.1%. (See Figure 8) B. Competitors in Mainland China Figure 8 JCDecaux s diversified client base (2012) (Source: JCDecaux 2012 Annual Results) In Mainland China, outdoor advertising competition is fierce. According to related survey, JCDecaux is now among the top five outdoor advertising companies in 30

32 Mainland China. Its competitors include Focus Media, Air Media, Vision China Media, and Whitehorse ADSHEL. (See Figure 9) Figure 9 JCDecaux s competitive landscape (2012) (Source: JCDecaux 2012 Annual Results) Among them, Air Media is considered to be the major competitor to JCDecaux. Though Air Media s revenue in 2012 was less than that of Focus Media s, its business mainly fall on airport advertising and gas station advertising. It has such a strong relationship with central and local government that it is able to monopolize all the advertising positions in every CNPC and Sinopec gas stations all over China. What s more, outdoor advertisings in Beijing, Wenzhou and Guangzhou airports are dominated by Air Media in a great measure. The competition between JCDecaux and Air Media is predicted to get even fiercer once more new airports are put into use. Though Focus Media ranks 1 st on the Chinese outdoor advertising company list 2012, 31

33 its business mainly focuses on LCD ads located in buildings, residences, supermarkets and theatres. This field is not exactly what JCDecaux aims at in Mainland China. However, its coverage and number of clients shouldn t be ignored. Vision China mainly focuses on bus and metro TV network. It is set up and monitored by State Administration of Radio, Film, and Television (SARFT). It occupies quite large amount of metro and bus lines. Since JCDecaux is expanding its metro TV network arena, in both Shanghai and Chongqing, Vision China would be the first on the road to raise a head-to-head combat. Whitehorse ADSHEL is another competitor of JCDecaux s in Mainland China s outdoor advertising market. Joint ventured by Clear Channel Outdoor in 1998, ADSHEL successfully developed Clear Media Ltd. and occupied a large scale of bus shelter advertising market in China, especially in first tier cities like Beijing, Shanghai, Guangzhou and Shenzhen. If JCDecaux is planning to expand its market share in bus shelter advertising, ADSHEL will be the tough one to deal with. (See Appendix I) 32

34 Chapter 4. Literature Review A. Comparative Advantage Theory In 1817, David Ricardo put forward a famous theory in international trading, which is called the Comparative Advantage Theory. In this theory, Ricardo stated how a party (an individual, a firm, or a country) uses the ability of producing a particular good service at a lower marginal cost and opportunity cost than another party and use this advantage to do international trading with others. Comparative advantage explains how trade can create value for both parties even when one can produce all goods with fewer resources than the other. To put it in a simple term: each country can gain money by specializing in producing the goods where it has comparative advantage. Even if one country is more efficient in the production of all goods than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies. In other words, each country has their unique advantage, thus nations should specialize in economic activities in which they have a comparative advantage and trade with others, even if one nation is absolutely inferior to another, the two nations can still gainfully trade. In this theory, Ricardo mainly notices differences in comparative advantage due to differences in labor productivity, which means whether an industry is suitable for export or not depends on its labor productivity. If the labor productivity in one country is higher than the other country, then it is likely the one with higher labor productivity will have to export to the lower one on business trading. For instance, 33

35 high technology is widely used in American agriculture and therefore raises its labor productivity. Since it owns relatively high labor productivity in agriculture compared with other countries, the US takes it as the comparative advantage and becomes one of the major agricultural exporting countries in the world. In the case of JCDecaux, as it is the world s NO. 1 outdoor advertising company in France which gains high labor productivity in this industry, JCDecaux has the comparative advantage compared with China s outdoor advertising industry; therefore, it decides to come to China for better development and expansion. The comparative advantage theory is further improved by Heckscher (1919) and Ohlin (1933) since they brought out the Heckscher-Ohlin (H-O) Model. In the H-O Model, instead of relying on labor productivity, it regards the factor endowments as the key construct to make comparative advantage, which means that countries with abundant natural resources will generally have a comparative advantage in products using those resources. For example, a nation with large oil reserve will have a comparative advantage in oil productions over other nations, and that is why the countries in Middle East depend on exporting oil productions for international trading. As an international company, JCDecaux also uses its factor endowment to underpin the comparative advantage in its international business. Since JCDecaux originates from France, a country that is famous for arts and design, JCDecaux itself has the endowment on designing and producing artwork. With the rich experience of doing outdoor advertising, it forms a strong comparative advantage in this industry. Therefore, JCDecaux actively seeks chances to expand its business in other countries. 34

36 And China, with the high-speed development in economy and huge potential market for advertising needs, becomes the largest target market that JCDecaux wants to enter. B. Linder Hypothesis Different from Heckscher-Ohlin (H-O) Model, S.B.Linder (1961) tried to explain the need of global business in terms of demand. Firstly he emphasized the concept of overlapping demand, meaning customers from two countries both purchase some similar goods. According to Linder (1961), the pattern and preference of consumption of a nation is determined by the income level. The closer income levels two different countries have, the more similar their demand structure will be, which eventually increase the overlapping demand of certain products. Linder finally proposed his hypothesis focusing the global trading of manufactured products: similar products might have various price due to economies of scale in different places. For consumers, it will be the nature for them to choose oversea products if the domestic ones are more expensive. Therefore it is easy for oversea products to enter the new market and start global business. Linder had successfully explained plenty of international trade behaviour after World War II especially for mass-produced goods. He also pointed out the necessity of being global for companies with a scale like JCDecaux, as JCDecaux will use overlapping demands among different clients with higher efficiency. This theory also helps JCDecaux broaden its business, as JCDecaux treat the global market with the same business model. However, since JCDecaux does not provide traditional 35

37 manufactured goods, Linder s theory has limitation. The reason is because what JCDecaux actually provides are promotion opportunities and creative ideas, which are relatively subjective. Thus, it is more complicated to identify the similarity among JCDecaux s existing clients and potential consumers. C. Product Life Cycle (PLC) Theory In 1966, R.Vernon proposed the theory of Product Life Cycle (PLC), indicating the procedure that a product enters the market, and finally be eliminated. Since the whole cycle lasts differently from country to country, same products might go through different stages in a particular point of time. Therefore the competitive position of this product varies from country to county. Vernon (1966) applies PLC theory on the changing of global business and investment. There are four stages in the product life cycle: 1) Introduction stage is when the product is just launched into the market. The companies are easy to suffer from loss due to high cost and low sales revenue. Because of the technology limitation, the new product cannot be mass-produced. Since customers have almost no idea about this product, the company has to spend a lot on promotion. 2) Growth is the stage customers accept this new product gradually with successful sales. This is the period when both demand and sales revenue raise up, while the production cost goes down. Competitors also enter the market for considerable profit and raise the supply of product. Therefore the price slowly decreases and finally 36

38 reaches the peak of profit. 3) Mature stage is when the product is into the mass production process and enters the market stably. The market tends to saturation and the sales growth speed becomes slower and starts to drop down. Promotion expense increases again to draw more attention from the customers as the competition in the market is aggressive and fierce. 4) Decline is the last stage according to Venon. In this stage, sales grow is low and the product fades out from the market since it no longer fulfill the need of market. Meanwhile, new products enter the market with better performance or lower price. Considering JCDecaux s client, who are mostly doing promotion for new products or the whole brand. They are in the first stage and need attractive advertising more than others. JCDecaux performs well in drawing attention from people and introduce new product to them. Again, Product Life Cycle theory has it own limitation when applying on modern products. JCDecaux provides outdoor advertisement, which is subjective to all customers and viewers. Multinational companies might take advantage from product life cycle since the time when cycle starts and ends differs from country to country yet it is hard for JCDecaux to use the same idea in various places. D. New Trade Theory According to the New Trade Theory, which was developed in the late 1970s and early 1980s by Krugman, Helpman, Markusen, Brander etc., first mover advantages, economies of scale and entry barriers are stressed in international trades. First Mover 37

39 Advantages comes from three aspects: 1) technological leadership, 2) preemption of assets, and 3) buyer switching costs (Lieberman & Montgomery, 1987). Technological leadership means a company may have advanced technology that can be patented. So any new entrance should buy from the first mover to get the same kind of technology. Preemption of assets refers to a company, as a first mover, have priority to get the assets. Because of the limited resources of the market, if first movers occupy the assets, followers would have no chance to get the same thing. As to buyer switching cost, if the switch cost of a certain market is high, consumers won t change their orders easily. For JCDecaux, as the first mover of Mainland China market, it belongs to the second condition. For example, JCDecaux signed an exclusive 15-year advertising management contract with SIA, so that it was able to operate and develop all the indoor and outdoor advertising media in both Shanghai Pudong International Airport and Hongqiao International Airport. However, other competitors, as followers of the market, had no chance to get the benefits from Shanghai airports like JCDecaux did. In New Trade Theory, there is a branch called Strategic Trade or The Brander Spencer Model. It is an economic model in international trade originally developed by James Brander and Barbara Spencer in the early 1980s (Spencer& Brander, 2008). According to this theory, governments can use trade policy instruments to shift profits from foreign to domestically owned firms, thereby raising national economic welfare at the expense of other countries (Brander, 1986). That is to say, strategic intervention by governments may help domestic firms reap first mover advantages in certain 38

40 industries. Besides, first mover firms, aided by governments, may have better odds at winning internationally. This theory stresses the role of government in trade. For a better development in the long term, it is necessary to build a good relationship with the government. Especially for a foreign company, getting on well with the local government and observing all the rules are important tasks when developing in foreign markets. With the help of Chinese government, JCDecaux s Chinese competitors, especially the state-owned ones, have some advantages because of supported policies. Therefore, it is necessary for JCDecaux to focus on innovation and creativity to attract more clients, and at the same time, try to avoid the disadvantages caused by the government. On the other hand, it is of great significance to maintain a good relationship with local government. For instance, the 15-years contract with Shanghai Pudong Airport guarantees its development in Shanghai for the next 15 years. Without solid relationship with the local government, it would be impossible to get those good locations for such a long time. E. National Competitive Advantage of Industries National Competitive Advantage of Industries is the most recent theory put forward by Michael Porter (1990). It is also known as the diamond theory for it can be fully illustrated with a diamond-shaped diagram. This theory mainly considers why certain industries, rather than others, within a country can act more competitively around the globe. According to Porter, four factors determine whether certain industries get the 39

41 competitive advantage in different nations. 1) Factor endowments, which refer to the natural and human resources as noted by the Heckscher-Ohlin Theory (Peng, 2009), are the key elements to form comparative advantage. Porter categorizes them into two forms. One is Home-Grown resources such as raw materials and the other is highly specialized resources like skilled labors and advanced technologies. Highly specialized resources are often specific for an industry and important for its competitiveness because they are difficult to duplicate and therefore lead to a competitive advantage (Porter, 1990). Generally, it takes longer time to form one s highly specialized resources because it needs acquired development. For the outdoor advertising industry, it relies more on the highly specialized resources due to its characteristics. JCDecaux, as the world s number one outdoor advertising company, gains certain advantages that other companies cannot exceed, such as the creative and innovative elements in the advertising. What s more, since it is the pioneer in the outdoor advertising industry, it owns much more experience than the Chinese outdoor advertising companies and knows better for their clients needs. Therefore, JCDecaux uses this competitive advantage to enter Chinese market and begin its expansion in China. 2) Tough domestic demand propels firms to scale new heights. If a company acquires the ability to satisfy the tough domestic needs, it is very possible that it is to succeed in dealing with less demanding overseas customers. (Peng, 2009) One major business of JCDecaux in China is metro advertising. Among six metropolitan cities including Beijing, Hong Kong, and Shanghai, JCDecaux has extend its market share in metro 40

42 stations by merging with domestic advertising companies. Before entering Chinese transport advertising market aggressively, JCDecaux has already been an expert in this area for long time. During past years, it successfully seeks out business opportunities in 287 transport contracts among 401 cities in the world. This can be link to the early growth of public transportation in Western Europe, where JCDecaux grew up. The metro systems in Paris and London have long history with considerable human traffic. This new opportunity and demand from clients drove JCDecaux to create new method to demonstrate the products and idea, and eventually become its mature business globally. 3) Domestic firm strategy, structure and rivalry in one industry act an important part in determining its success or not in other countries (Peng, 2009). JCDecaux s strategy of being global and developing its business in China, whose economy develops fast recent years, is wise and profitable. Because of its advanced strategy, JCDecaux became the first mover of outdoor advertising in China and turned to be quite successful. JCDecaux s advantage, compared with the other competitors in China, is its design and innovation. JCDecaux is good at combining technology and advertising. For example, JCDecaux puts the new technology called Quick-Response Code (QR code) into its advertising. In addition, the material JCDecaux use is both high-tech and environmental friendly. JCDecaux s advanced lighting technology in outdoor advertising can save over 48% of the energy compared with other lighting facilities. It also buys raindrop-collecting devices to gather rainwater and reuses them to wash their outdoor facilities. 41

43 4) Related and supporting industries provide the foundation for key industries to excel (Peng, 2009). There is no way for JCDecaux to be globally competitive without the absence of related and supporting industries back in home. Because each of these supporting industries has gone though years of hard work and investment, therefore they are mature enough to provide their maximum supports to JCDecaux s outdoor advertising industry. To sum up, Porter indicates that the interaction of these four factors explains what makes certain industries excel the others in different countries. And as illustrated with the example of JCDecaux, we can see why this company can act more competitively around the globe. F. FDI Strategic Motivations What motivate a company to do Foreign Direct Investment (FDI)? According to Jack Behrman (1972), their strategic motivations can be categorized into: 1) natural resource seekers, 2) market seekers, 3) cost and efficiency seekers, and 4) information seekers. It is noticeable that large multinational enterprises (MNEs) would like to achieve multiple objectives, and most engage in FDI that integrates the characteristics of two or more of the above categories (Dunning and Lundan, 2008). Among those four, natural resource seekers are usually linked with corporations whose development are based on consuming natural resource such as petroleum, while information-seeking FDI can be easily found in financial industry. Dunning and Lundan (2008) argue in Multinational Enterprises and the Global 42

44 Economy (2 nd Edition) that market seekers are enterprises that invest in a particular country or region to supply goods or services to markets in these or in the nearby countries. To be more specific, market-seeking investment may be undertaken for four reasons: 1) to sustain or protect existing markets, or to exploit or promote new ones; 2) to help products to be adapted to local needs, culture mores and resources; 3) to have a physical presence in the leading markets, which helps to chase away competitors, and this reason has become increasingly important as part of MNEs global production and marketing strategies; and 4) the action of host governments encouraging such investment, which remains the single most important reason for market-seeking investment (Dunning and Lundan, 2008). For instance, JCDecaux is originated from France and brings forward the one world strategy. Besides putting efforts into exploiting markets in three primary regions of developed economies: North America, Europe, and Japan, JCDecaux also pays special attention to markets in the emerging economies which attracts almost one-third of the FDI around the world Brazil, Russia, India, China and South Africa, also known as BRICS. So far, it presents itself in more than 55 different countries and 3,688 cities, producing local advertising for each single area. As to the efficiency seekers, for most of the time, they will be experienced, large and diversified MNEs producing fairly standardized products and engaging in internationally accepted production processes (Dunning and Lundan, 2008). As an illustration to this point, car industry is the best example. The production cost may be reduced by gaining access to new technologies or competitively priced inputs and 43

45 labor (Dunning and Lundan, 2008). Beyond this, the transaction costs are less than supplying products from a distance. The intention of the efficiency-seeking investment is to take advantage of different factor endowments, cultures, institutional arrangements, demand patterns, economic policies and market structures, by concentrating production in a limited number of locations to supply multiple markets (Dunning and Lundan, 2008). China is acknowledged as a country with rich resources and large number of cheap labor. Setting up factories in China and engaging in mass production with assembly lines can reduce the cost and remain in high efficiency at the same time. This is also true when it comes to JCDecaux. Billboard adverting occupies a sizeable proportion of the company s products, when producing billboard frames in large scale, the goal of cutting down the cost and increasing the efficiency can be achieved in Chinese factories. On the other hand, with a large amount of Chinese domestic consumers, frames produced in one city can be transported to nearby cities for sale. So China, or any other countries or regions share the similar situation, will be considered as promising land for investment. Despite its obvious financial advantages, FDI has also been described as an expensive and risky option for companies than licensing and exporting, especially in terms of the high costs of establishing facilities and problems with doing business in a different culture. G. OLI Theory The OLI Theory enveloped by John Dunning (1977, 1980, 1988) is a mix of three 44

46 different aspects of FDI: 2) O stands for Ownership advantages. This refers to both tangible and intangible assets of a company. To successfully enter a foreign market, a company should have certain characteristics that would triumph over operating costs on a foreign market (Dunning, 1977, 1980, 1988). In JCDecaux s case, the advantages can be its 100% controlled capital, brand, fame, technology, innovation, capability of allocating resources etc. 2) L stands for Location advantage. Location advantages of different countries are the key factors to determine who will become host country or region for the activities of the MNE. The specific advantages include: a) economic benefits quantitative and qualitative factors of production, market size etc., b) political advantages common and specific government policies, and c) social advantages cultural diversity, consumption habit etc. (Hanson, 2001). JCDecaux sets its head office of China in Shanghai city is mainly out of its favorable conditions in all these three aspects. 3) I stands for Internalization advantages. FDI wishes to internalize its special advantage because of market imperfections and the fear of establishing a competitor. In other words, if a MNE has a core advantage, it will firstly consider exploiting it to other countries to get rid of domestic competitors. To sum up, L explains which country and I answers why internalization. O is a necessary condition for both internationalization and internalization. The OLI theory shows that factors of ownership, location and internalization are different cases in different companies and reflect the economic, political, social characteristics of the 45

47 host country or region. Therefore, the objectives and strategies of the corporation will depend on the challenges and opportunities offered by different types of countries or regions (Hennart, 1982). 46

48 Chapter 5. Proposition Since the foundation of JCDecaux is France, it has been successful not only in its hometown, but also in the international advertising market. It is believed that JCDecaux must have an idiosyncratic character to start going global and keeping forward-moving progress. Therefore, this thesis will mainly explore JCDecaux s current business model and the existing market in Mainland China as well. To be more specific, through an advanced and beneficial proposal to the government, JCDecaux may attract the local government to cooperate and achieve mutual benefit. From this point of view, JCDecaux acts as the dominant player in local markets, while the government serves as a supporter. In order to develop in China, JCDecaux may make full use of Think Global, Act Local strategy. For example, the advertising design is applied globally, but the language of slogan is Chinese when the ad being put in China. In addition, different local governments share in the joint venture could be different according to various conditions. Secondly, JCDecaux is a market seeker as well as cost and efficiency seeker. It develops to be global, searching profitable markets all around the world. At the same time, it balances the cost and efficiency in a certain market, such as labor cost or land cost. As one member of BRICS, China has a great potential market. JCDecaux pays special attention when choosing advertising locations in China. Cities with large population and high consumption level such as Shanghai will always be its first choice. Beyond this, it also thinks highly of internalization. We can assume that it follows the FDI Strategic Motivations and Dunning s OLI Theory. And based on 47

49 former successful experience, JCDecaux can just duplicate its business model to other oversea cities. Thirdly, JCDecaux is mainly in charge of innovations and designs, while the cost of producing the billboard is paid by the clients. In addition, because of the intimate cooperation with local government, JCDecaux enjoys the support provided by the government, making sure that it can get paid on time. As a result, it is possible that JCDecaux can earn money no matter what situation the world s economy is in. Last but not least, most contracts between JCDecaux and famous French brands are signed in France rather than in local markets, which makes JCDecaux strong to negotiate with the governments due to having a handful of affluent clients. Our central proposition is that the relationship between JCDecaux and owners of the named brands may have some kind of financial connection that leads to the success of JCDecaux s global strategy. 48

50 Chapter 6. Questionnaire Analysis 1. Rationale of Questionnaire To better understand Chinese consumers opinions about outdoor advertisements in airports, we conducted a questionnaire containing 19 questions of multiple choices and rating scales, regarding to different forms of advertisements in the airport. (See Appendix II) The questionnaire is designed into three parts. The first part is personal information of the respondents, including gender, age, region, education level, occupation, income level and preference for advertisings. The second part is designed to gather opinions about outdoor advertisements including concentration to the design and content, as well as purchasing habits influenced by advertising. In the third part, we further look into the attitudes and feelings from audiences towards the billboard advertising in the airport by particularly introduce the Likert Scale, which helps to provide more accurate data. The publishing time for the survey is from February 21 st to March 15 th in 2013 and mainly spread through the Internet. 2. Questionnaire Sample Since the aim of the project is to investigate the development of JCDecaux in China, therefore, our target respondents are mainly from Mainland China. Due to time and region restrictions, we mainly depend on the Internet to spread our questionnaires. As Sina Weibo is regarded to be the most popular and widely used social media in Mainland China, we posted our questionnaire on it and invited users with many followers to fill in the questionnaire and help forwarding it. The total number of the 49

51 questionnaires we sent out is around 300. However, we finally retrieved 200 that are completely finished. Therefore, the questionnaire sample is Basic Result Analysis A. Personal information of the respondents 200 respondents took part in our survey, and following are the results and detail analysis of the first part. a) Gender Male 28% Female 72% Female Male Figure 10 Gender of respondents In these 200 feedbacks, female occupy over 70% of the respondents and male only takes up less than 30%. b) Age 50

52 % % 41 9% 20 2% Figure 11 Ages of respondents When we refer to the ranges of ages, Figure 11 shows that 21 to 30 years old is in the dominant situation that holds 84% of the total. This is because we mainly deliver our surveys through the Internet and people between 21 and 30 are the active users of the Internet. What s more, we notice that the 21 to 40 segment altogether takes up 89% of the total. This group of people tends to move from places to places, no matter go travelling or on business trips, they have more frequent contact with the billboard advertising in the airport than people in other age segment. Respondents age above 41 ranks the second and takes up 9% of all. People in this age group have more disposable income and spare time for purchasing and travelling compared with other segments. So people of these two groups become target audience for the outdoor advertisements in airport. c) Regions 51

53 45% 41% 40% 35% 31% 30% 25% 20% 15% 10% 5% 5% 11% 1% 2% 9% 0% Figure 12 Regions of respondents Question 3 is about the regions of respondents. We divided the whole Mainland China into seven parts, namely Eastern China, Southern China, Central China, Northern China, Northwest China, Southwest China and Northeast China. The result shows that Southern China and Eastern China are the two regions with highest percentage, 41% and 31% respectively. These two regions cover larger population in China, the economic level and average consumption per person as well as population mobility are relatively high. As we mentioned before, JCDecaux does put in more resources in cities within these two regions and it turns out to be wise to do so. Also, the data shows that we receive replies from every part of Mainland China, which increases the diversity of our survey. d) Education level 52

54 PHD or Above 3% Below College 4% Master Degree 44% Bachelor Degree 49% Below College Bachelor Degree Master Degree PHD or Above Figure 13 Education levels of respondents Figure 13 shows over 97% of our respondents have bachelor degree or above, which means the average education level of the interviewees is relatively high. This makes our survey more convincing because well educated respondents tent to provide more rational and objective opinions. e) Occupation Freelancers 6% Students 46% Private enterprise employees 29% Employees of national authorities, enterprise and institutions 19% Figure 14 Occupations of respondents We divided occupation into four categories according to the current job types in Mainland China, namely national authorities, enterprise and institutions employees, private enterprise employees, freelancers and students. Figure 14 clearly shows that 53

55 student takes the largest proportion, which is up to 46%, while private enterprise employee also stands 29%. Employees from national authorities, enterprise and institutions contribute 19% and freelancers take the rest 9%. f) Income level 4,001-6,000 11% 2,001-4,000 21% 6,001-8,000 9% 8,001-10,000 3% Under 2,000 41% Over 10,000 15% Under 2,000 2,001-4,000 4,001-6,000 6,001-8,000 8,001-10,000 Over 10,000 Figure 15 Income levels of respondents As the National Statistic Bureau (NSB) set RMB 2,000 to be the starting point of the individual income tax in Mainland China, we therefore also set it as the first level of monthly income. In order to make the classification more specific and balanced, we take RMB 2,000 as interval and set the ending point at RMB 10,000. In accordance with occupation, monthly income within RMB 2,000 gets the highest percentage (41%); the RMB 2,001 to 4,000 segment takes 21% and those whose incomes are higher than RMB 10,000 comes the third (15%). When we combine the results of education level, occupation and income level of our surveys, we found that the income levels of respondents have a strong connection with their occupations. Because most of our respondents are students that have no or little income, the below RMB 2,000 segment occupies the largest percentage. 54

56 However, the statistics show that one with higher education level is more likely to get higher income, because in the RMB 10,000+ monthly income segment, two-thirds of them have master degree or above. Since well-educated people take large proportion in our survey, we assume that they can be regarded as the high-income group of people in the future. So the outdoor advertising company should also target on these future potential consumers and arouse their purchasing desires. g) Advertising forms 80% 73% 70% 60% 50% 40% 30% 20% 10% 0% 12% 21% 47% 60% 24% 8% 6% Figure 16 Respondents preferred advertising forms To investigate which forms of advertising attract audiences attention most, we listed out eight options of advertising forms including television, broadcast, newspaper, magazines, outdoor advertising, light box on cars, direct mail and others. From the result, we can see television is still the most attractive form of advertising with 73%, outdoor and magazine also catch audiences attention with 60% and 47% respectively. The result indicats that these three forms are important advertising channels to reach 55

57 audiences/customers. Also, it confirms that it is correct for JCDecaux to keep doing outdoor advertising for it can reach more audiences and gets more attention from people. B. General opinions about the outdoor advertising In the second part of the survey, we designed five general questions in regard to respondents concentration to outdoor advertising in airports, to examine how they influenced by airport advertising and what are the most attractive contents for them. a) Notice rates of outdoor advertising in airports Never 1% Always 44% Sometimes 55% Sometimes Always Never Figure 17 Respondents notice rate towards outdoor advertising in airports Figure 17 illustrates that 55% of the respondents tend to notice the advertisements in airports from time to time and 44% will always pay attention to those advertisements. But there is still 1% who shows no interest in airport advertisements at all. Generally speaking, advertisements in airports get a high notice rate among passengers, because they are set in the places where can be easily spotted by travellers. In other words, the outdoor advertising can fulfill the basic task of dissemination for advertisers. b) Impressions about outdoor advertising in airports 56

58 Can tell the overall content of the ads 86% Can tell the specific content of the ads 9% Know nothing about the ads 0% Feel vague about the ads 5% Can tell the specific content of the ads Can tell the overall content of the ads Feel vague about the ads Know nothing about the ads Figure 18 Respondents impressions about outdoor advertising in airports To evaluate what kind of impressions can outdoor advertising leaves to the respondents, we listed out several options to examine how well they can remember the contents of the billboards. As the result reveals, 86% of them state that they can remember the general content of the advertisement while only 9% will look at the advertisement in detail and tell the specific content. 5% of the respondents feel vaguely about the contents of the advertisement. c) Influence of outdoor advertising in airports 57

59 Want to have a try of the product 9% No interests at all 11% Impression enhanced, but no desire of consumption Interest increased, want further information Interest increased, want further information 30% Impression enhanced, but no desire of consumption 50% Want to have a try of the product No interests at all Figure 19 Influences of outdoor advertising in airports Question 10 is design to see whether the advertisements in airport can generate audiences purchasing desire. As the result reveals, 50% of the respondents claim that the airport advertisements leave them an impression of the products but cannot inspire them to purchase while 29% indicate the advertisements inspire their further interests about the products and eager to know more information about them, 9% of the respondents even point out that they have the impulse of purchasing after seeing the advertisements. However, there is still 10% who have no interest in purchasing at all. d) Content of outdoor advertising in airports 58

60 New product & promotion 14% Brand display 13% Discount information 24% Creativity of product (layout & design) Discount information Creativity of product (layout & design) 49% New product & promotion Brand display Figure 20 Respondents preferred contents of advertising There are various contents in airport outdoor advertisements and audiences have their preferences about them. The aim of this question is to find out what kind of contents can attract more attention from audiences. Figure 20 shows 49% of the respondents care much about the creativity of the products (design and layout) and 24% of them will be attracted if the advertisement contains discount information. The advertisement of new products attracts 14% of the respondents and the brand showing ads gets the lowest attention of 13%. The result implies that advertisers can devote more time and energy in the creation of their advertisings in order to catch the eyeballs of the customers and further arouse their purchase desires. e) Interested consumption field 59

61 Digital product 64% Skincare & make up 58% Jewelry 24% Cigarette & wine 3% Entertainment Venue 27% Tourism 69% Education 29% Car Investment 18% 17% Others 3% 0% 10% 20% 30% 40% 50% 60% 70% Figure 21 Respondents interested consumption field Through analyzing the data, we found that most of the respondents would love to spend on tourism and digital products, as well as skincare and cosmetic products. This gives JCDecaux some clues on selecting their customers. JCDecaux can give preference on these three kinds of advertisers; for advertising of these three areas can receive better feedbacks from consumers. C. Findings after cross analyze the statistics of the two parts. Men actually pay more attention to outdoor advertising than women Through further analyzing the data, we find that men actually pay more attention to outdoor advertisements, because the percentage of frequently notice is 42% for 60

62 female, however, the percentage raises to 46% in male s group, slightly higher than the number in female s group. Female is easier to be influenced by outdoor advertisements It seems the outdoor advertising works better on female than male audiences. 10% of the female respondents want to have a try at the products after watching the advertisement while the percentage of male respondents falls to 3%. This data gives a hint to the advertisers that they shall consider more about the female audiences because they are of greater potential to purchase. Preference differences exist among the audience Different age groups have different emphasis on the advertising contents. The under 20 group is 100% regarding the creativity (layout & design) as the most important thing in an advertisement, that is mainly because young people enjoy distinctive and novel things; the 21 to 30 group of people pay most of their attentions to discount promotion among the four groups that reaches 31.5% while the 31 to 40 segment have no interests in discount promotions at all. The possible reason may be the income of the 21 to 30 group is less than that of the 31 to 40 group. However, people above 40 years old are easily attracted by advertisements of new products. The different preferences help JCDecaux to better target the audience group according to their preference. Creativity (layout & design) is important to outdoor advertising Creativity always gets the highest marks after we separately study the statistics of each segment in gender, regions, occupation, education level and income level. That s 61

63 good news for JCDecaux since it is famous for using distinctive design and advanced technology as well as creativity into their outdoor advertisings. They have to enhance their advantage in design in order to keep catching the eyeballs of the audiences. Outdoor advertising has more influence on well-educated people Those who are under the bachelor s degree influenced little by outdoor advertising. None of them shows any purchasing desire after watching the outdoor advertisement. Among the well-educated people, those who own the Doctor s degree or above influenced most by outdoor advertising, 60% of them state that they want to have a try at the product after watching the advertisement while the percentage in bachelor and master degree is 42% and 36% respectively. It seems that well-educated people are easier to be attracted by outdoor advertisements. D. Others JCDecaux should keep on doing outdoor advertising In the first and second part of the survey, the result shows that television, outdoor and magazine advertisements are the top three popular advertising forms among the audience, which means they are effective in attracting audiences attention. Outdoor advertising ranks the second among them, indicating this kind of advertising channel gains large competitive advantage in advertising industry. As JCDecaux is in the leading position in the outdoor advertising industry, it can make good use of its advantage to continue focusing on the outdoor advertising industry. What s more, there is great room for outdoor advertising to develop in Mainland 62

64 China, as people s need for public transportation is increasing year by year. The construction of airports and subways are accelerating not only in first tier cities but also second and third tier cities. If JCDecaux can catch the chance to develop its outdoor business in larger parts of China, it can definitely earn more profit in the following years. Audiences preferences lead to client choosing for JCDecaux People will pay more attention to the advertisement that contains their interested products, so audiences preferences can be the criteria for JCDecaux s client choosing. According to our survey, digital products, cosmetic and tourism are the three leading subjects that consumers are more willing to buy. Thus, outdoor advertising contains these three areas are attractive to the audiences and can better arouse consumers purchasing impulse. When the advertisers receive the positive feedbacks from consumers, they will consider maintaining or enhancing cooperation with JCDecaux. Therefore, we suggest JCDecaux to take the audiences preferences into consideration when choosing their advertisers in order to enable its stable development. 4. Product Evaluation (Billboard Evaluation & Consumer Cognition) A. Data Description The third part of survey demonstrates the feedback and thoughts upon JCDecaux s airport advertisements from Mainland China audiences, using five points measurement proposed by Likert. In each question, respondents are required choose the coded numbers which is most consistent with his or her opinion. 63

65 a) Advertisement Evaluation The evaluation includes the content and aesthetics (layout and design). Respondents need to assess the advertisements provided based on intuition. Pairs of adjectives describing content and aesthetics are given to measure that to what degree the respondents would agree with these words. Generally, majority of audience show positive recognition of JCDecaux s advertisement. Data shows that 87% of the respondents feel their advertisements good-looking, marking giving higher marks on question 20 ( beautiful or ugly, see Table 2). Content The result of survey shows that JCDecaux is disciplined when developing content for airport advertisements. People s feelings of the content of advertisements are stable and predictable. Among the keywords related with content, 76% of the respondents think the ads is fairly standard-looking or quite unique while the rest 4% find them purely unique ( popular or distinct ). Meanwhile, 181 out of 200 respondents feel the ads neither boring nor too intriguing ( boring or interesting ), occupying the proportion as 91%. Another pair of keywords ( local or global ) illustrates that more than 84% of them believed the ads provided relatively more global feelings. A possible reason is that the brands on the ads are all foreign and well-known in China. Obviously, JCDecaux selects content under the influence of both clients and general environment, while clients will have larger influence since normally they fix the product and spokesperson on billboards. 64

66 Aesthetic It also proves that JCDecaux is very professional on relative technique and equipment. 88% of the respondents think JCDecaux performs quite higher standard on color adjustment and overall printing effects (keyword rough or fine ). Similar to content, 73% of the respondents think the design of ads is avant-garde but not edgy ( conventional or vanguard ). 83% of them believe the ads tend to be more realistic ( abstract or realistic ). 82% of the people find the ads quite lively in layout ( dull or lively ). Over half of respondents think the layout is simple ( simple or complex ). And assessing simple or luxury, the most common opinion is neutral Popular 通俗 Rough 粗糙 Conventional 傳統 Abstract 抽象 Local 本 土化 Boring 沈悶 Dull 呆板 Ugly 醜陋 Distinct 獨特 Fine 精緻 Vanguard 前衛 Realistic 寫實 International 國際化 Interesting 有趣 Lively 活潑 Beautiful 美觀 65

67 Frugal 樸實 Simple 簡單 Table 2 Distribution of billboard evaluation (percentage) Luxury 奢華 Complex 繁複 b) Effect of billboards Last five questions focus on the link of billboards and audiences habits in Mainland China. In the survey, over 82% respondents tend to have a look at the billboards in airport, and similar proportion of people emphasize their being harmony with the environment (see Table 3). Majority of them value the design of billboards very much. Besides, for more than half of them, good-looking billboards will be topics when chatting with others. However, majority of respondents still reservations about the actual effect of large billboards. 45% of the respondents do not totally trust the billboard ads, while 51% of them deny the affect of these ads upon their consuming habits. This situation might be related to JCDecaux's client (global luxury brands) and different buying power of various social classes in Mainland China. I would pay attention to billboard s content in airport. 如果我在机场 见到这类 大型 广告牌, 我 一般会留意它们的内容 I trust billboard very much. 我 非常信任这种 大型 广告牌 Such ads will largely affect my consumption. 商家的这类型 广告投放会对我的消 1 Strongly Disagree 2 Disagree 3 Neutral 4 Agree 5 Strongly Agree

68 费产 生很 大影响 The ads are harmonious with the environment. 我认为这些 广告和周围的环境和 谐, 不突兀 I place great emphasis on the design of ads 我 十分看重 广告的美术设计 I would talk about beautiful billboard ads with others. 我会和别 人谈起美观的 大型 广告 Table 3 Distribution of Mainland audiences recognition and habits towards billboards (percentage) 5. Cross Data Analysis A. Demographic Billboard evaluation analysis More women than men prefer outdoor advertisements 60% of the female respondents think the JCDecaux s billboard ads in airport are beautiful, while the proportion among the male group is 53%. Thus, women in Mainland China tend to appreciate billboard ads more than men. Gender and attitude towards JCDecaux's ads 60% 50% 40% 30% 20% 10% 0% Male Female Positive 53% 60% Negative 47% 40% Figure 22 Gender and attitude towards JCDecaux s ads 67

69 Higher educated people are more picky 20% of doctorial degree owners, 66% of master degree owners, 54% of bachelor degree and 66% of diploma owners evaluated positively, which is evenly distributed except the doctor degree owners. It seems as if people with highest education in their professional field tend to have more expectation and critics about the billboard ads. Education and attitude towards JCDecaux's ads 80% 70% 60% 50% 40% 30% 20% 10% 0% Doctors Masters Bechelors Diploma Owners Positive 20% 66% 54% 66% Negative 80% 34% 46% 34% Figure 23 Education and attitude towards JCDecaux's ads Billboards are popular among the young and middle age Among the group who marked 4 or 5 on JCDecaux s airport ads, 9.8% are older than 40, which is 66% among their age group; 1% are between 31 to 40 (25% of 31 to 40 age group), 85% are between 21 to 30 (60% of the whole group between 21 to 30), 2.9 % are younger than 20 (75% of the whole group younger than 20). Therefore, although there are less people older than 40 and younger than 20 who assess the ads positively, they are still most likely to have good impression on JCDecaux s billboard ads base on their proportion inside the age group. 68

70 Age distribution of who appreciate JCDecaux's ads % Over 40 Over % Under % Under % Figure 24 Age distribution of who appreciate JCDecaux's ads Advertisements are welcomed by every income group People who like JCDecaux s airport ads also contains: 60% of the group with more than RMB 10,000 income, 60% of group with income between RMB 8,001 to 10,000, 53% of the group with income between RMB 6,001 to 8,000, 55% of the group with income between RMB 4,001 to 6,000, 51% of the group with income between RMB 2,001 to 4,000, and 68% of the group with income lower than RMB 2,000. Since the distribution is quite even, there is no obvious relationship between income and appraisal of JCDecaux s billboard ads. Freelancers and students accept advertisements most 70% of the freelancers, 49% of the employees of private or foreign enterprises, 53% of the state workers or civil servants, and 65% of the students appreciate JCDecaux s airport ads. It seems like the freelance workers and students are more possible to like these billboard ads. A possible reason could be that they are both open-minded with 69

71 stronger ability to accept. Occupation and attitude towards JCDecaux's ads 70% 60% 50% 40% 30% 20% 10% 0% Freelancers Employees Civil Servants Students Positive 70% 49% 53% 65% Negative 30% 51% 47% 35% Figure 25 Occupation and attitude towards JCDecaux's ads B. Demographic Consumer cognition analysis Age Generally, 45% of respondents don t trust billboards that much, marking 1 or 2 on Question 15, which containing 20% of the group older than 40, 20% of the group between 31 to 40, and 51% of the group between 21 to % people choose to be neutral as the largest group, containing 40% of group older than 40, 62.5% of the group between 31 to 40, 33% of the group between 21 to 30, and 50% of the group younger than 20. There are still 16% people who trust billboards very much, containing 40% of group older than 40, 12.5% of the group between 31 to 40, 13% of the group between 21 to 30, and 25% of the group younger than

72 Age-Trust Analysis of JCDecaux's ads 70% 60% 50% 40% 30% 20% 10% 0% Over Under 20 Trust 40% 18% 16% 25% Neutral 40% 63% 33% 50% Don't Trust 20% 20% 51% 25% Figure 26 Age-Trust analysis of JCDecaux's ads In the age group of over 40, 40% of them would trust billboards (mark 4 or 5); 40% of them take neutral opinions, 20% of them don t trust billboard so much. This group trusts billboards most than any other age groups. Therefore, the potential audience group could be older around or above 40. Attitude to JCDecaux's ads among middle-age group Don't Trust 20% Neutral 40% Trust 40% Trust Neutral Don't Trust Figure 27 Attitude to JCDecaux's ads among middle-age group Therefore, people who are older than 40 tend to trust more on billboard ads, while younger group between 21 to 3o mostly do not believe billboard ads. 71

73 Income From the terms of income, 19% people from the group with more than RMB 10,000 income every month, 6% of the group with income between RMB 6,001 to 8,000, 25% of the group with income between RMB 4,001 to 6,000, 13.5% of the group with income between RMB 2,001 to 4,000, and 16% of the group with income lower than RMB 2,000 tend to trust billboard. In the neutral group, there are 31% of members in highest income group, 40% of the group with income between RMB 8,001 to 10,000, 33% of the group with income between RMB 6,001 to 8,000, 20% of the group with income between RMB 4,001 to 6,000, 38% of the income group between RMB 2,001 to 4,000, and 40% of the group with income under RMB 2,000. For the 45% of total respondents who do not trust billboard so much, it contains 50% of the highest income group, 60% from the second highest income group, 53% of the group with income between RMB 6,001 to 8,000, 50% of the income group between RMB 4,001 to 6,000, 38% of group between RMB 2,001 to 4,000 and 44% of the lowest income group. Besides the fact that most of people tend to not trust the billboard, not even mention making consumptions based on billboards information, findings of income-trust analysis also shows that there is no direct relationship between audiences income and how much they trust about billboard ads. 72

74 Income-Trust Analysis of JCDecaux's ads 60% 50% 40% 30% 20% 10% 0% Over 8,001-6,001-4,001-2,001 - Under 10,000 10,000 8,000 6,000 4,000 2,000 Trust 19% 0% 6% 25% 14% 16% Neutral 31% 40% 33% 20% 49% 40% Don't Trust 50% 60% 53% 50% 38% 44% Figure 28 Income-Trust analysis of JCDecaux's ads C. Others Q9-Q16: Billboards attract more customers through long time watching Being asked about the attention paid to content of ads in Question 9, 86% of the respondents will have a glimpse on the billboard and can tell about the content roughly. Among this 86% people, over 80% marked 1, 2 or 3 in Question 16, while only 18% of them marked 4 or 5, which means majority of respondents deny the impacts of billboard ads on their consumption. Thus, if people just pass by the ads with a look on it, the ads effect on their consumption behavior is very limited, and vice versa. 73

75 Chapter 7. Interview Analysis 1. Introduction to the interviewees a) Thierry Bardoux Thierry Bardoux is the CEO of JCDecaux China Airport Division. His major job is the supervision of Operations and Development of JCDecaux Airport Division in China and to optimize P&L by strong involvement in sales strategy, cost control and new media development. He also manages China airports tenders for new advertising concessions, deals with the involvement in the relationship with several government organizations and China airports authorities and stimulates teams for innovative and creative media solutions. He used to be the sales director of JCDecaux Advertising in Paris, France for nearly 6 years, and then he came to China and served as the general manager of JCDecaux Shanghai International Airport advertising from January 2005 to January During these years, he launched the first joint venture of JCDecaux in China. He made great efforts to increase multiplied revenues for more than 10 times and built and developed the team to more than 100 staffs in Shanghai, China. (Linkedin page of Thierry Bardoux) b) Arnaud Redon Arnaud Redon is the general manager of JCDecaux Airport Beijing, Chengdu and Shenyang. He used to work as a sales representative of regional sales team, and an account director of national sales team in JCDecaux France from 2002 to 2004, and 2005 to 2006, respectively. In March 2006, he came to China and became the general 74

76 manager of sales & marketing (street furniture) in JCDecaux China. He became the general manager of JCDecaux Airport Beijing in October And then, he took the position of JCDecaux Chengdu in January 2012 and JCDecaux Shenyang in January (Linkedin page of Arnaud Redon) c) Common points of two interviewees Both of the two interviewees are from JCDecaux France and serve as the team leaders in JCDecaux China. According to The OLI Theory enveloped by John Dunning (1973, 1980, 1988), I stands for Internalization advantages. French leaders in China make sure that all the operations are following the parent company s guidelines and bringing their ownership advantages such as capital, brand, fame, technology, innovation, capability of allocating resources etc. into full play. In addition, they speak French, which is convenient for them to communicate with the parent company and avoid misunderstandings of the guidelines. Therefore, JCDecaux China will own the ability to compete with local companies. 2. Interview Analysis Because of the limitation of location, we are not able to conduct a face-to-face interview with JCDecaux s managers in Shanghai or Beijing. This interview is done by the journalist from LOOKWE, and we just cite the whole report from the website of JCDecaux China. Even though we don t do the interview by ourselves, we still get much information, which are helpful and valuable for the research of the marketing strategies of JCDecaux. 75

77 a) Scope of business According to the introduction of Thierry Bardoux, JCDecaux owns a wide range of business scope. First, it cooperates with cities in the world to offer street furniture with advanced design, innovation and services. Second, they offer solutions on media publicity, including street furniture media, billboards media, bus media, metro media, and airport media. Third, they offer accurate media planning and originality to optimize the advertisement injecting for the customers. Although there are various businesses in JCDecaux, the core of all these operations is related to its core advantage innovation & design. According to The OLI Theory, to successfully enter a foreign market, a company should have certain characteristics that would triumph over operating costs on a foreign market (Dunning, 1973, 1980, 1988). JCDecaux is an excellent international company, which is able to take advantage of its core superiority to every business line all over the world. b) Entering to Chinese market JCDecaux has launched its business in Asia since the late 1990s. Though China was very attractive to JCDecaux, they didn t come to China until an appropriate opportunity turned out. In 2004, JCDecaux signed an exclusive 15-year advertising management contract with SIA, so that it was able to operate and develop all the indoor and outdoor advertising media in both Shanghai Pudong International Airport and Hongqiao International Airport. In 2005, they bought two listed companies, who running the business of metro advertising and bus advertising, and began their bus advertising, metro advertising and airport advertising business in China. 76

78 JCDecaux is the first mover to Shanghai Airport, so it got the advantages of first mover. For first mover, advantages come from three aspects: 1) technological leadership, 2) preemption of assets, and 3) buyer switching costs (Lieberman & Montgomery, 1987). JCDecaux signed the contract of 15 years long, which means that they own the advantage of Shanghai Airport as an advertising asset for such a long time. The other followers can never get these advantages of first movers. In addition, when the contract period comes to the end, JCDecaux owns the priority to maintain its advantages of first moves, because they have got loads of experience on running airport media. c) Good relationship with government Arnaud Redon said that they have cooperated with Beijing government. At first, they focused on street furniture construction, such as newspaper reading window, cooperated with a local company. People can read the newspaper and watch the ads at the same time. However, limited by the policy of Beijing outdoor advertising published in 2008, they gave up to run the business of newspaper reading window and turned to run the business of transportation media advertising. Besides, Thierry Bardoux introduced what JCDecaux s programs for public welfares in China, including spreading environmental protecting, sustainable development and wildlife protections, etc. He said that JCDecaux would like to be part of a country if they do business in this country. Since a country may face some challenges, JCDecaux hopes to conquer the challenges which the country faces with the government. In the future, JCDecaux will take part in more public welfares in 77

79 different areas. There is a model called Strategic Trade or The Brander Spencer model in international trade originally developed by James Brander and Barbara Spencer in the early 1980s (Spencer& Brander, 2008). This model stresses the importance of the government in the process of doing business in a foreign country. In order to do business in a foreign country, it is necessary to build a good relationship with the local government. Therefore, the company can avoid many limitations when developing business. For JCDecaux, they cooperate with Beijing government to operate their business and do public welfares to take more social responsibilities, so that they can build a good relationship with the government. They may achieve more opportunities for their development with the help of the local government. These opportunities may become the main resources for their business operations, such as the unique advertising space. In addition, they may decrease the negative influences of local rules and policies, which published by the government to shift profits from foreign to domestically owned firms. So the weakness as a foreign brand will decline. d) Respecting rules, policies and cultures There are different rules and policies in China, even in different cities. Arnaud Redon said that because of the policies in Beijing, they transform their major business from newspaper reading window to transportation media advertising. Besides, the logos of JCDecaux never exit on the advertising in Beijing to obey the rules of Beijing, but logos are on the advertising media of Shanghai. 78

80 Thierry Bardoux also made some comments of Chinese employees. He thought that because of different cultures, Chinese employees are diligent and positive, but more cautious and will never tell their ideas precisely. So he has adjusted his own manner of working to adapt to Chinese employees, and tried to encourage them to release their potentials. The theory Think Global, Act Local stresses the localization when developing in a foreign country. Since there are different rules, policies and cultures, a company must follow the local traditions and never go against the government. JCDecaux is a successful international company, so they can easily figure out and respect the differences, even taking advantage of these differences. They get rid of the conflicts with government or local employees, and focus on the business operations. d) The advantage of JCDecaux Thierry Bardoux thought that the main advantage of JCDecaux is the quality of advertising media. Customers satisfy with JCDecaux s distinctive media design and attractive advertising locations. What s more, JCDecaux is proud of their media products. They promise to offer their best service to their customers. Of course, accurate brand positioning of customers are very important. When JCDecaux entered China, their first job is to immediately choose luxury brands to advertise in airports. At that time, luxury brands are competing for advanced outdoor locations of advertising, so that they can own high-quality advertising. JCDecaux will bring these brands to airport media and surprise all the airport operators, tourists, even themselves. Creating a good media environment is the first step to attract the high-end brands. In 79

81 fact, there is no secret of sales. There are only four elements: innovation, reaction, solution, and relation. According to Michael Porter s National Competitive Advantage of Industries Theory (1990), there are four factors determine whether certain industries get the competitive advantage in different nations. Domestic firm strategy, structure and rivalry in one industry act an important part in determining its success or not in other countries (Peng, 2009). JCDecaux is good at innovation and design. Their excellent products and services decide their good reputation in France, even around the world. Taking advantage of their advantage, JCDecaux is quite successful in China. They run outdoor business in metros, airports and buses. They always make money no matter the external economic situation is good or bad, because they always have clients. What s more, JCDecaux s unique business model, which is successful in France, is still effective in China. In general, advertising companies just sell their ideas to customers and then choose their targeted media channels. However, JCDecaux goes in an opposite direction. They first get different channels, such as the airport advertising locations, and then they take advantage of these advanced locations to attract customers. In order to advertise in good locations, customers must cooperate with JCDecuax, or they will lose the most attractive locations of advertising. Fixed clients are also JCDecaux s advantage. JCDecaux gives the priority to its old customers whey different brands are competing for the advertising locations. So they have built a stable relationship with these old clients. When they come to explore new 80

82 international market, they bring all these old clients to the world and keep offering advanced services. Besides, in international market, the French companies always get the priority of the good advertising of locations because of the stable relationship. 81

83 Chapter 8. Conclusion 1. Special Findings a) Idiosyncratic business model JCDecaux is successful because their idiosyncratic business model, which is effective and strategic. Traditionally, companies sell ideas to customers first and then finds the media channels. The whole process is totally a business without any cooperation with the government. (See Figure 29) However, JCDecaux explores an opposite method. (See Figure 30) Taking advantage of the good relationship with the government, they first sign the contract with advertising locations and taking these good locations to attract various high-end brands to cooperate with them. No matter how good the advertising ideas are, they can t be popularized without locations. Only JCDecaux s clients can enjoy noticeable advertising locations and excellent advertising services. Figure 29 Model of traditional advertising activities 82

84 Figure 30 Global advertising activities of JCDecaux Customers would like to advertising in the most effective way and at the most attractive place, so they always sign contract with JCDecaux years in advance to cooperate with JCDecaux to get the advertising locations. Besides, the innovation and design of advertising created by JCDecaux are still outstanding in advertising industry. Compared with advertising companies with traditional model, who have no guarantee for the future business, JCDecaux is successful and earns money with sufficient clients all the time. b) Symbiotic Marketing mutual benefits between the clients and JCDecaux In the market, JCDecaux and its clients share the same interests. They built a good relationship and cooperate with each other. The clients advertise their products to go global with the help of JCDecaux s excellent services and attractive advertising 83

85 locations. JCDecaux expands its business and earns money with the financial support of the clients. Both these two sides enjoy the mutual benefits and co-prosperity. For some fixed great clients, especially the French ones, JCDecaux always gives them priority to have better locations. As the third party, the government is still important for JCDecaux s development. Taking advantage of the good relationship with the government, JCDecaux can win the bidding of good advertising locations, which are meaningful for both JCDecaux and its clients. c) Global Market, Single Customer Another characteristic that distinguishes JCDecaux from other advertising company is a unique global strategy: global market, single customer. Though holding ad templates from over one hundred airports all over the world, JCDecaux smartly treats them as one global market with certain customer groups. This clear and direct principle is based on its own specialty, which simplifies JCDecaux s business around the world, and stands out among its competitors. Taking LVMH, the giant in luxury goods industry and also JCDecaux s major customer as an example, once they reaches a new contract, what JCDecaux needs to do is putting up the duplicates of LVMH s single ad on various airports according to the contract, and receiving money. Because of economy scale theory, high level of duplication reduces the cost, thus, the more ads JCDecaux has put on, the lower operating cost will be. For LVMH, it is the most efficient way to express its brands 84

86 around world, as JCDecaux helps them to reach the end-customers among airports in various countries. Meanwhile, passengers traveling through these airports would see the same and standardized ads (or ads in same style but a little difference) in different destinations, which creates additional effects. Based on former research and data from our survey, most of mainland audience would like to see the same ads in different places, especially in and outside China, which gives them feeling of being global and catching up with fashion, and insensibly gain the awareness or impression of the brand. d) Unfavorable industrial factors the best days of luxury goods in China has gone When analyzing the Chinese market, we found an interesting phenomenon bribery takes a huge part of luxury goods consumed in China. Officials tend to give each other luxury goods as presents to enhance their guanxi, in order to get promotion or approval of projects. However, in recent years, media frequently reports about luxury goods owned by officials, which provoked large amount of people in China. As new leaders took up the post, they strictly advocated not purchasing and using luxury goods. The industrial factors nowadays has become unfavorable for luxury goods and outdoor advertisers in Mainland China. Therefore, it is predictable that the best time of luxury goods in China has past and international named brands should find other ways to approach to Chinese market. 85

87 2. Conclusion Idiosyncratic Outdoor Advertising Industry Risk Free of JCDecaux Outdoor advertising is a sunrise industry, compared with traditional advertising media, such as TV and radio. Outdoor advertising is idiosyncratic with strategic locations, which needs no marketing at all. Attractive locations can appeal clients and earn money without any risks. So it keeps developing all along. JCDecaux, doing business in outdoor advertising industry, is risk free. It takes advantage of good locations to attract clients. This idiosyncratic business model Location + Clients = Business makes sure that JCDecaux earns money. Besides, the cost of advertising is paid by the clients, and JCDecaux offers excellent services to advertise for its clients. Even though the cost may increase in the future because of the increasing charge of the government, the clients would like to pay for the increased part. After all, they have to maintain the good locations to advertise and the excellent designs of the advertising. So JCDecaux makes money all the time without any risks. 3. Recommendation for JCDecaux a) JCDecaux should keep on doing outdoor advertising Compared with television and radio advertising, outdoor advertising is more like a sunrise industry, which has great room to better develop in the future. According to our survey, JCDecaux is now doing quite well in this industry and cannot be easily caught up by other world-class companies. As a result, JCDecaux should keep doing 86

88 outdoor advertising, especially transport advertising, as its priority of development. b) JCDecaux should choose clients which appeals to audiences As our survey reveals, audiences have great interest in advertisements regards to digital products, cosmetic and tourism, what s more, they are more willing to buy these kinds of products. That means advertisers are more likely to see sales growth if they launch ads. Therefore, JCDecaux can lean more on these categories and thus receive better results for advertisers. c) Creativity (layout & design) is important to outdoor advertising. Design and layout are always JCDecaux s strengths. Besides, the bravery to adopt new technology is another advantage to make JCDecaux stand out from the crowd. Since audiences are easily attracted by special designs, JCDecaux could pay more attention to its design and combination of hi-tech elements. 4. Limitation and Further Study a) Limitation of questionnaire For the time and resource limit in doing this project, the questionnaire is mainly conducted through online survey. Even though it is an effective way to gather information, it leaves us a few limitations. 1) Our sample does not truly cover all the regions in Mainland China we get larger amount of responses from costal areas of Mainland China but less from the inland. Additionally, only the ones with Internet access are participating in the survey while the potential audiences of outdoor advertising without Internet access are excluded. 2) Numbers of responses from each 87

89 age group are not even. Respondents are mostly concentrated in the age of 20 to 39, and above 41, which is probably result from the fact that we spread most of the questionnaires through our international networks, so the respondents are mostly at our ages. And 3) continuous (e.g. monthly) surveys should be conducted to gather continuous data, which might provide a more consistent and actual result to the research. However, since we are students rather than professionals, we can just assume that this very survey reveals the average condition of the subject. b) Limitations of interview In the process of launching our interview, we tried to contact a former account manager of JCDecaux Cityscape, however we received no reply. But later on we found an interview in YouTube that could answer several questions we had prepared for this company. And the interviewee was Jean-Charles Decaux, who could provide a more macroscopical view of this company than any other. So we decided to take advantage of it. Together with another interview of Thierry Bardoux and Arnaud Redon specifically focuses on JCDecaux s strategy of airport advertising in Mainland China, we actually get what we want to know about this company. However, that makes the interview second-hand information. And surly, if we could conduct the interview by ourselves, we could get materials that are more valuable and insightful for our subject. c) Further study The recommendations in this thesis are mainly on a strategic level, and it requires a relatively long period of time to see whether they can perfectly go with the Chinese 88

90 market and make profit for the company or not. As a result, small-scale experiments about strategies can be conducted, and more first-hand information can be collected for further research. Further study about JCDecaux s marketing strategy can focus on exploring other countries development. As what mentioned in the thesis, the BRICS are the new rising forces of the world economy. And from the 2012 financial results of JCDecaux, it is noticeable that its revenue from these five countries is increasing dramatically, compared with its old markets. As a result, the BRICS might become the priority markets of JCDecaux. However, Mainland China is the only one mentioned in the thesis. If deeper researches on Brazil, Russia, India and South Africa are conducted, we can further confirm whether JCDecaux is really directing its idiosyncratic Global Market, Single Customer strategy across the globe. 89

91 Reference 1. Behrman, J. N. (1972). The Role of International Companies in Latin America: Autos and Petrochemicals. Lexington, MA: Lexington Books. 2. Brander, J. (1986). Rationales for strategic trade and industrial policy. In Strategic Trade Policy and the New International Economics, (Ed.), P. Krugman. Cambridge, MA: MIT Press. 3. China Advertising Association Net. (2011). Top100 ranking list of revenues of OD advertising companies in China. Retrieved from -aaea84ffe76e.htm. 4. Day, G. (1981) The product life cycle: Analysis and applications issues, Journal of Marketing, vol. 45, Autumn 1981, pp Dunning, J. H. (1977). Trade, location of economic activity and the MNE: A search for an eclectic approach. In B. Ohlin, P. O. Hesselborn, & P. M. Wijkman, The international allocation of economicactivity. London: Macmillan, pp Dunning, J. H. (1980). Towards an eclectic theory of international production: some empirical tests. Journal of International Business Studies, 11 (1), pp Dunning, J. H. (1988). The Eclectic Paradigm of International Production: A restatement and some possible extensions. Journal of International Business Studies, 19 (Spring). 8. Dunning, J. H., & Lundan, S. M. (2008) Multinational Enterprises and the Global Economy, 2 nd Edition. Cheltenham: Edward Elgar. 9. Fan, Y. L., & Fan, Z. (2003). Out Door Advertising. Shanghai: Shanghai People s Press. 10. Frankel, J. (1997). Regional Trading Blocs in the World Economic System. Washington, DC: Institute for International Economics, pp. 60, Ge, L.L. (2012). Design and Research of the Interactivity of Outdoor Advertising. Beijing: Beijing Jiaotong University. 12. Hanson, G. (2001). Should Countries Promote Foreign Direct Investment?. G-24 Discussion Papers 9, United Nations Conference on Trade and Development. 90

92 13. Hennart, J. F. (1982). A theory of multinational enterprise. Ann Arbor: University of Michigan Press. 14. Hornberger, K., Battat, J. & Kusek, P. (2011). Attracting FDI How much does investment climate matter?. THE WORLD BANK GROUP FINANCIAL AND PRIVATE SECTOR DEVELOPMENT VICE PRESIDENCY, August (327), pp Huang, H. F. (2012). The Revenue of OD Advertising in China is more than RMB 27.6 billion. Retrieved from JCDecaux 2012 Annual Results. (2012). Retrieved from Leamer, E. E. (1995). The Heckscher-Ohlin Model in Theory and Practice. Princeton Studies in International Finance 77. Princeton, NJ: Princeton University Press. 18. Lieberman, M. B., & Montgomery, D. B. (1987). Montgomery. FIRST-MOVER ADVANTAGES. Stanford, US: Stanford Business School. 19. Ohlin, B. (1967). Interregional and International Trade. Harvard Economic Studies 39. Cambridge, MA: Harvard University Press. 20. Peng, M. (2010). Global Business, 2 nd edition. Stamford, Connecticut: South-Western Cengage Learning. 21. Porter, M. E. (1985). Competitive Advantage. New York: Free Press. 22. Porter, M. E. (1990). The Competitive Advantage of Nations. London: Macmillan. 23. Spencer, B. & Bredner, J. A. (2008). Strategic Trade Policy. In The New Palgrave Dictionary of Economics (Ed.), Basingstoke, Hampshire: Palgrave Macmillan. 24. Tianto Info (Beijing) Consulting. (2012). The Report of Chinese Advertising Industry in Retrieved from World Executive DataBase. (2012). Data of Chinese Advertising Industry. Retrieved from Wu, B. L. (2010). Advertising X Media. Beijing: Economic Daily Press. 91

93 Appendix Appendix I Competitors of JCDecaux in Mainland China Comparison of JCDecaux and its major competitors in Mainland China: Name Capital Nature Products and Places (Scale) Advertisers/Clients Telecom (1) Beijing Mobile Hi-Tech Product (18) Transport ads (airport, metro, Samsung, LG bus): Cosmetics (5) Airports in Beijing, Shanghai, Estée Lauder, Lancôme Qingdao, Chengdu, etc.; Automobile (3) metro and bus ads cover 34 Porsche, Jaguar JCDecaux China Foreign capital cities around Greater China. Street furniture ads (bus shelter, campus): 100% coverage in Ningbo bus shelter market; campus ads cover 31 cities, 291 universities. Food & Drink (9) Coca Cola, Wang Lao Ji Finance Product (3) HSBC, Union Pay Luxury Product (14) Hermes, Cartier Service (8) Emirates Airline, FinnAir Other (10) Australia Travel Bureau, DDB China Telecom (3) China Unicom, China Mobile Focus Media Joint capital by foreign companies (2003) Building & elevator ads: 100 first and second tier cities. In-store ads: 206 first and second tier cities, over 38,700 flat panel displays installed in over 4,000 hypermarket and store locations. Poster frame ads: 70 cities. Movie Theatre ads: 81cities, 279 theatres. Hi-Tech Product (20) Nokia, Samsung Cosmetics (8) P&G, Dior Automobile (13) Toyota, Audi Food & Drink (16) Coca Cola, McDonald Finance Product (14) HSBC, BOC Luxury Product (4) Hennessy, TISSOT Real Estate (8) Service (8) Fedex, Emirates Airline 92

94 Other (16) Amway, Taobao Telecom (3) China Unicom, China Mobile Hi-Tech Product (7) Philips, SONY Cosmetics (22) Watsons, P&G Automobile (5) Vision China Media Private enterprise (monitored by SARFT) Buses TV programs and ads: 61 cities, 149,000 terminals. Metro TV programs and ads: 8 cities, 73,000 terminals. Honda, Nissan Food & Drink (20) Dove, Carlsberg Finance Product (11) ICBC, ABC Marts (5) GOME, Wal-Mart Cloths (4) Nike, LiNing Other (7) Chow Sang Sang Telecom (4) China Unicom, China Mobile Gasoline station (light box and Hi-Tech Product (21) billboard) ads: Canon, Panasonic 30 cities, more than 2,000 gas Automobile (25) stations. Land Rover, Maserati Air Media Private enterprise Airport (TV, LCD, LED) ads: Cover more than 50 airports in China. Airplane TV ads: Cover 9 airline companies and 2,200 airlines. Food & Drink (8) Coca Cola, Nestle Finance Product (16) MasterCard, Citic Bank Real Estate (10) Poly Other (40) Hennessy Telecom China Mobile Whitehorse ADSHEL Joint capital by foreign companies (1998) Bus shelter ads: 29 cities, mainly eastern cities, over 32,000 light boxes. Hi-Tech Product Nokia, Motorola Cosmetics P&G Food & Drink Pepsi Cola, Lipton Other Amway 93

95 Appendix II Questionnaire Online questionnaire link: ON29IX2tVTG9pSEE6MQ Print version: 94

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