Fact: Mainland China is one of the fastest-growing markets for advertising/pr. Actually, for super conglom the WPP Group plc, the country presently accounts for the highest amount of revenue in Asia. That's about £270 million annually! According to WPP’s chief Martin Sorrell, “China is fundamental to the growth of any self-respecting multinational.” Indeed. Maybe "essential" is a better word. Revenues generated in China for WPP totally offset the recent downturn in British and U.S. advertising markets. So wonder Sir Martin can barely contain his enthusiasms.
Consequently, WPP’s strategy is to greatly expand their network there. In a recent interview, Sir Martin said that WPP could double the size of its Chinese operations within five years, adding that Asian business would account for at least 20 percent of the company by 2011. Just last week, the company bought a 49 percent stake in the agency Raynet, accelerating its push into the region's booming economy. With the acquisition of Raynet, WPP now has more than 7,500 people on the ground there.
But it doesn’t appear that Sir Martin planned on slippery oil slicks. The Fanchang Scandal last week sent the business into a scary skid. Bottom line, good cautionary lesson: business, both culturally and legally, is different there.
According to the Shanghai Daily, last week a manager of Fanchang Grease Factory, a cooking-oil plant in eastern China's Zhejiang Province, was arrested for using grease refined from swill, sewage and even recycled industrial oil as raw materials to produce lard. The plant produced more than 100 tons of lard since September that was subsequently sold to retailers across the country. Lab tests have confirmed that the lard contained various toxic pesticides. Authorities in Taizhou City have since shut the factory down.
The implications for WPP and others are chilling. The problem is that the Western imperialists cannot assume that Chinese law and culture is aligned with Western standards. In the case of Fanchang, the country's regulations stipulate that only pure fat of hogs can be used as raw material to produce edible lard. Apparently, the Chinese believe that eating stuff made from swill, sewage and even recycled industrial oil is hazardous to one’s health. Advertising/PR industry analysts agree that this could pose serious problems for Western Image Factories there.
Russia... for Westerners the name inspires images of Doctor Zhivago and James Bond. Spies, vodka, subzero temperatures offset by the tactile sense of abject fear... a land twice the size of the U.S. populated by veritable mutes terrified of the prospect of being whisked off to Siberia, or worse. Then in 1991 came the collapse of the Soviet Union; and in little more than a decade, Russia has become a major player in the G8, working to further develop a market economy and achieve consistent economic growth.
But a dark phoenix has risen from that rusted Iron Curtain. The former KGB tactic of "dezinformatsiya" is now the common business practice there known as "Black PR."
What is it? In simple terms, instead of concentrating one's efforts on the creation and maintenance of a positive reputation and/or image for clients, one tries to discredit and destroy a competitor.
According to our correspondent at Delovaya Pressa in Moscow, Ivana Kalay, said, "Outside of today's accepted professional standards, this practice is now a mainstay at many in-house PR departments from Moscow to St. Petersburg. Frankly, representatives of our biggest business openly acknowledge buying off editors and reporters, and using rumors and false information to quash their rivals. They also believe that this is the easiest and the most effective way to get the media's attention and onto their agendas. Thus far, attempts by the international PR firms to impose any western framework and value system has been scoffed at."
Why? The reasons are both cultural and economic.
Understanding the cultural root is easy. In the not so distant past, it was a very effective method. KGB operatives were masters at tactics ranging from disinformation to assassination. Forget exotic devices like poison pens that fired hydrocyanic acid gas or pellets of ricin; or the infamous "kiss of death," a 4.5-mm single-shot encased in rubber and disguised as a tube of lipstick. KGB operatives used disinformation not only directly against Western governments, but also against governments not following pro-Soviet policies. For example, KGB operatives used disinformation tactics in attempts to destabilize Egyptian president Anwar Sadat for his increasingly pro-Western policies by issuing false statements attributed to Islamic fundamentalists. The disinformation not only contributed to the assassination of Sadat, but also helped impassion Islamic terror groups. To avoid direct conflict with the U.S., the KGB had also funded subversive groups and domestic terrorists within the United States, as well as worked through intermediaries in Cuba.
Understanding the economics is fairly straightforward, as well. When the Soviet Union fell, Russia had to restructure its economy and pronto. It was like changing a tire while traveling 45 miles an hour. As such, it's been a bumpy road to say the least. Russia's more open economy has been marred by reconciliations, fits, starts and crashes. It wasn't until 1999 that their economy actually started to recover. Greatly assisted by the weak ruble, imports became expensive which boosted local production. Further, protective import barriers and rampant corruption has ensured that it's almost impossible for businesses to import goods. As a result, the country is presently running a huge trade surplus. Stoked by higher oil prices, the GDP is currently growing by an average of 6.7% annually.
That's a near perfect environment for Black PR to take root. According to Kalay, "Today's sophisticated Russian PR expert not only has the power to conceal the truth, but he/she has the tools to create their own." Ivana continued, "While traditional corporate PR is trying to align outmoded strategy with advances in new media technologies, those in Moscow are advancing the development of whole new cottage industries in industrial espionage, computer hacking and real social engineering."
Bottom line: it isn't going away anytime soon; maybe never. Actually, some experts think that the practice is rapidly spreading West.
According to one of the world's leading experts on the topic of the impact of culture and communications on international economies, Martin Turnbull from the Kepler School of Management, said, "It's simple game theory. If you have 5 people playing a game of cards and two are cheating and benefiting without repercussion, in short order all five will similarly cheat."
Experts agree: Black PR is on the rise and increasingly being woven into communications programs. Turnbull blames the Internet. "There have always been cheaters at the table but today, when it comes to disinformation, the Internet has just about totally eliminated negative consequence. In the past the spread of false information was easy to be checked and recognized and stifled. Nowadays, the line between fact and a fiction is becoming more and more unclear."
Ironically, it looks like Russia may have the last word on free speech and capitalism.
On Thursday, March 8, 2007 at 7:41 AM, Ronn Torossian, President and CEO of 5WPR, emphatically promised that he was going to sue us. No real reason, he was just irritated by our teasing him about getting in bed with pornographer Joe Francis. Anyway, Ronn gave his obscenity-laced word that we'd see the complaint in 72 hours. It's now late by
Kathleen Durazo about A Measly $2.8 Million Goes Missing, Lawsuit Results Fri, Jul 31, 10:58:34 AM Ray Durazo (the founder) sold the company to Dan in 1999. He was not involved in any of this. He (and I) found out about the lawsuit in the LA Times. In addition to embezzling this m [...]