Local advertising agencies in Kenya Before and after affiliation with International advertising agencies

Abstract

Firms adopt various strategies in order to remain competitive in an increasingly global market. One of the strategies adopted is strategic alliance, which involve the cooperation between two or more firms who pool resources together to create a value proposition for their clients and themselves. Strategic alliances create synergy for the partners through sharing of resources and capabilities The objectives of the study was to firstly to identify factors that influence the local advertising agencies to affiliate to international advertising agencies, and secondly to determine the extent to which these factors have been achieved after affiliation, in carrying out these objectives the processes and operational changes to the local advertising agency by the six advertising functions or departments before and after affiliation were also evaluated. Data was collected in the month of October 2003. The population of interest consisted of all local advertising agencies in Kenya affiliated to international advertising agencies. According to the APA records there are only six agencies (see Appendix 3). The firms varied in size from small 10-25 employees to large firms with more than 36 employees. Both Primary and Secondary data was collected. Primary Data was collected using a semi -structured questionnaires administered through personal .intervlews with eighteen executives from the five advertising agencies. These executivesand staff included the Chief Executive Officers or Managing Directors of the five agencies. Other staff included Client Service Directors and Account Directors,Finance Directors, Media, Production and Traffic Managers

Findings indicate that affiliations help a local advertising agency achieve most but not all of the theorized affiliation objectives. Objectives that do not seem to be achieved include improved profitability and cost reduction through better efficiencies. The research found out that positive changes related to professionalism, teamwork and image. This is consistent with theorized objectives related to prestige value, learning and global tools. One aspect that was lacking in the good changes is economies of scale. This means that after affiliation expected economies of scale are not realized in real terms. The implication of this challenge is for members of the advertising industry consider a value chain approach. In this case the remuneration of the international affiliate should be based on a value added. Activity based costing is also recommended to manage the cost structures in and of the partnership. Also there is need to reevaluate the accounts function after affiliation. The exit clause in the contract agreement should be fair to both parties and not punitive