JOURNAL OF MARKETING COMMUNICATIONS 9 257273 (2003)

The advertising industry in Bosnia-Herzegovina: born again

MURIS CICIC AND NENAD BRKIC

Department of Marketing, Faculty of Economics, University of Sarajevo, Trg Oslobodjenja 1, 71000 Sarajevo, Bosnia-Herzegovina

The development of the advertising sector in Bosnia-Herzegovina can be divided into two periods, i.e. the period before and the period after the entry of trans-national advertising agencies into the Bosnia-Herzegovina market. Until the mid-1990s there were no foreign advertising agencies in Bosnia-Herzegovina. There were several local agencies, mostly connected with the media. Since 1996 several international agencies have entered the market. The process of transformation from underdeveloped and local level to international competition was stimulated by overall economic liberalization and by intensive growth of the media sector in the country. Today there are 23 agencies for advertising and marketing communications in the Bosnia-Herzegovina market and the overall annual turnover of the sector is US$1520 million. The purpose of this paper is descriptive: to describe the rejuvenation of a national advertising industry following a period of war and economic destruction. It is felt that the paper may have resonance for other potential markets that may pass through similar circumstances. KEYWORDS: Advertising industry; advertising agencies; Bosnia-Herzegovina; post-war reconstruction.

INTRODUCTION Bosnia-Herzegovina is a developing country and it is going through a period of economic transition and reconstruction. In 1995, just a few years ago, 4 years of war, which all but ruined the economy of the country, came to an end. Until 1992 Bosnia-Herzegovina was part of socialist Yugoslavia together with five other republics: Slovenia, Serbia, Croatia, Macedonia and Montenegro. At the start of 1992 the people of Bosnia-Herzegovina voted for independence and, shortly after, war started. The neighbouring countries, first Serbia and later Croatia, occupied parts of Bosnian territory. In the autumn of 1995 the war was concluded via the Dayton Peace Agreement. The whole country, including the advertising sector, had to start from point zero again. In a way the transition that had started in 1990 and stopped in 1992 was now allowed to continue. Economic liberalization and foreign investment in the services sector in particular, together with liberalization and privatization of the media, have strongly supported the development of the advertising industry in Bosnia-Herzegovina. Internal development has been part of globalization of the media and advertising market in the country, with a number of international agencies entering the market.
Journal of Marketing Communications ISSN 13527266 print/ISSN 14664445 online 2003 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI: 10.1080/1352726032000183241

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In historical terms modern types of advertising agencies were initiated in Bosnia-Herzegovina in the early 1980s due to preparation for the XIV Winter Olympic Games in Sarajevo in 1984. However, this was just a temporary phenomenon. The first international agencies to arrive in the Bosnia-Herzegovina market were McCann Erickson, S.V.-RSA and 2AM-FCB in 1997. As in other ex-Comecon countries the entry of foreign agencies opens the question about their influence on the sector in general. Based on very small local agencies and advertisers, in a short period the market has moved to the transitional stage dominated by trans-national advertising agencies. This paper concerning the advertising industry in Bosnia-Herzegovina attempts not only to analyse the transformation of the industry as part of a macro-economic reform process from centrally planned to market economy, but also to explore the links between the influence of such a market economy and development of the advertising sector. Further, the paper aims to assist in better understanding of the role and importance of the market economy as the generator of development in transitional economies. In the case of Bosnia-Herzegovina, this is undoubtedly of paramount importance. In concrete terms, this study was designed for analysing three major issues relating to the development of the advertising sector in Bosnia-Herzegovina: (1) assessing current development of the sector, (2) assessing the extent to which globalization affects such development and (3) exploring the consequences of the presence of trans-national advertising agencies in the country to date and potential future trends. This study of the advertising sector in Bosnia-Herzegovina has two major parts. First, the paper examines the development and structure of the sector and, second, it combines that analysis with a critical overview of the organization and functioning of agencies in the sector. Thus, this paper attempts to combine the methods of political economy communications, historical method and institutional analysis of the sector. In addition, the paper presents empirical evidence gathered through interviews with all advertising agencies in Bosnia-Herzegovina. GENERAL FEATURES OF THE ADVERTISING SECTOR IN BOSNIA-HERZEGOVINA This research identifies three types of advertising and marketing communications organizations in Bosnia-Herzegovina. (1) Agencies for mass media advertising (including full-service agencies, creative services and media buying services). (2) Public relations agencies. (3) Other marketing agencies (direct marketing services, Internet marketing agencies, marketing event organizations, fair organizations and similar). In the year 2000 there were just 23 agencies. This had grown slightly at the time of submission of this paper (i.e. 2003). The advertising agency business in Bosnia-Herzegovina has seven major characteristics. (1) A small market. (2) Low entry barriers. (3) Full-service agencies operate in several cities in the country, not just in the capital Sarajevo. (4) The major agency income comes from international clients. (5) The market has several large clients served by full-service agencies.

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(6) Media investment is concentrated in electronic media and, in particular, television. (7) The market and the sector have been liberalized to a great extent. The first characteristic means that the Bosnia-Herzegovina market is one of the smallest in Europe. Overall advertising expenditure is approximately US$15 million. That is only US$4 per capita, which is approximately one-twentieth of average global expenditure and much less than the Western European expenditure of US$180 per capita. Further, the number of agencies in the market is tiny, even though the current number is a great improvement on the past when the advertising business, including the creative part, was dominated by the media. The second characteristic shows low barriers to entry in the Bosnia-Herzegovina advertising market. The nature of the advertising business refers to personal service, which means that capital investments for entering the market are low. The major cost in the Bosnia-Herzegovina industry are salaries that equate to 6070% of the overall costs of advertising agencies. As emphasized by Ducoffe and Smith (1993) patents, secret skills, raw material, cartel limitations and equipment requirements, often quoted as import or entry barriers, are absent in the advertising sector (p. 244). In 2000, there were 23 agencies in Bosnia-Herzegovina that served larger clients, whereas many micro-agencies, often one-man businesses, covered a limited market for smaller clients. However, these micro-agencies, even though also registered for advertising, very often did not possess the features (personnel, basic equipment, capital requirements, income, etc.) for being seen as genuine advertising agencies. Therefore, these agencies were not included in this analysis. However, it is evident that, as the market grows and develops, so these entrepreneurial agencies will help stimulate creative and media services, they may also be future leaders in this industry. They may well form a valuable source of future research. The third characteristic tends to indicate the dualistic nature of the geographical distribution of agencies, unlike other countries. Apart from the capital Sarajevo, advertising agencies in Bosnia-Herzegovina have a presence in the cities of Banja Luka, Tuzla and Bihac. This is partly a consequence of market fragmentation by agencies from SR Yugoslavia that tended to treat the Bosnia-Herzegovina market as two separate markets. Sarajevo is undoubtedly a major locus of advertising investment and presence as shown in Table 1. The fourth characteristic of the advertising business in Bosnia-Herzegovina is the overarching dominance, in terms of market share, of international agencies. The clients of these agencies tend
TABLE 1. Comparing advertising agencies in Sarajevo, Banja Luka,Tuzla and Bihac Sarajevo Agency type Banja Luka Tuzla Full services Marketing Bihac Full services

Full services including Full services media buying creative services, public relations and marketing Ownership type Domestic and foreign Domestic and foreign agencies agencies Advertisers Regional National and international Media Regional National Number of agencies 17 3

Domestic agencies Domestic agencies

Regional Regional 2

Regional Regional 1

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to spend approximately 75% of the total advertising expenditure, in money terms approximately US$11 million. The international agencies tend to use a global approach in their activities, where Bosnia-Herzegovina is just seen as a small segment. Local companies serve the rest of the market, with approximately US$4 million in advertising expenditure. By comparison local agencies are tiny in capital investment, personnel and income terms. The reasons for this are threefold. First, clients and the media are in direct contact and handle a significant part of advertising expenditure without agencies. This equates to approximately 2025% of the market or between US$3.0 and 3.5 million. Second, the principle of conflict of interest avoidance, which was introduced to the Bosnia-Herzegovina market by international agencies through exclusivity agreements, reduces opportunities for local agencies to increase their market share and turnover. Thirdly, low entry barriers to the market enable micro- or one-man agencies to generate small amounts of business. The fifth characteristic of the Bosnia-Herzegovina advertising market is the dependence of most agencies on one or a few large clients. Most agencies realize 25% or more of their income from one client and 50% or more from three clients. Loss of even one client could cost an agency its growth and development for a very significant period of time. The sixth characteristic indicates that most advertising expenditure is directed towards electronic media and, in particular, television. Electronic media accounts for 73% of total expenditure or nearly US$11 million. A further 20% is spent on outdoor medias (approximately US$3 million) and 7% on print media (i.e. US$1.05 million). This percentage split is consistent with the structure of advertising expenditures in other countries in transition, even though in Bosnia-Herzegovina, electronic media appear to be proportionally stronger then anywhere else. A seventh characteristic of the advertising market in Bosnia-Herzegovina is evidence of intensive liberalization and internationalization. A few years previously the dominant players in the market were all domestic agencies such as Fabrika Sarajevo, OSSA Sarajevo, Futura Sarajevo, Trio Sarajevo, PROMO Tuzla and others. The entry of international agencies in 1997 and 1998 changed the structure of the advertising industry entirely. At the present time in 2003 the market is dominated by international agencies, with surprisingly one national agency remaining among the five largest. As could be anticipated, personnel movement in agencies has become the norm. The prevalent pattern of agencies core business has been extended to the first stage of integrated marketing communications, meaning that, in addition to advertising, most agencies have included sales promotion, public relations and marketing events in their services. There is also an ongoing attempt to set up a media-buying organization in Bosnia-Herzegovina. GROWTH OF ADVERTISING IN BOSNIA-HERZEGOVINA Since 1995, following the end of hostilities, the advertising sector in Bosnia-Herzegovina has been growing at a mean annual rate of 30%, which supersedes the overall growth of the economy. A reasonable explanation for this is that international agencies in the BosniaHerzegovina market are heavy spenders, particularly in the starting years of their market entry. An assessment for the year 2001 was that advertising expenditure was approximately US$20 million, which was 30% higher than in 2000. However, that was still low in terms of advertising expenditure in other comparable countries. Table 2 indicates the overall changes in the media markets in Bosnia-Herzegovina from 1996 to 2001. Advertising expenditure in Bosnia-Herzegovina accounts for 0.35% of gross domestic product (GDP) and per capita is between US$3.8 and 4.9, which is very low from a European perspective.

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TABLE 2. Advertising indicators in Bosnia-Herzegovina Bosnia-Herzegovina Population (millions) Households with television Total GDP in US$ billions GDP per capita in US$ Advertising as percentage of GDP Advertising per capita in US$ Advertising expenditure in US$ millions Television advertising as percentage of total advertising Television advertising expenditure in US$ millions 1996 3.5 977 000 2.7 770 0.24 1.85 6.5 60% 3.9 1999 3.8 1 049 000 4.4 1.160 0.26 3.0 11.5 62.5% 7.19 2000 3.8 1 086 000 4.3 1.130 0.35 3.8 15 65% 9.75 2001 3.9 1 125 000 4.4 1.130 0.45 4.9 20 67.5% 13.5

Sources : Zenith Media (1999), Central Intelligence Agency (CIA) (2000) and World Bank (2000).

THE STRUCTURE OF THE ADVERTISING SECTOR IN BOSNIA-HERZEGOVINA

Advertising agencies
An analysis of the market share shows that, among the three leading agencies, covering approximately 50% of the top ten markets, there is one domestic agency and two international agencies: Fabrika, S.V.-RSA, and McCann-Erickson (see Table 3). There are indicators that the process of change in the advertising sector structure and ownership has only just started. Some local agencies are in negotiation with international investors concerning possible joint ventures or foreign direct investment. The motivation for local agencies to enter negotiations and ventures with international partners is not only capital gain, but also know-how transfer, greater professionalism, an increase in market share, client acquisition, greater profitability and the promotion of better known brands.
TABLE 3. Ten leading advertising agencies in Bosnia-Herzegovina 2000 Range Agency Turnover US$ 1 2 3 4 5 6 7 8 9 10 Total Fabrika S.V.-RSA McCann-Erickson S Team Bates Saatchi & Saatchi S Team Bates Saatchi & Saatchi S-M J.W.T. 2AMFCB Aquarius IntermedijPromo MITA 2 000 000 2 000 000 1 500 000 1 000 000 1 000 000 900 000 750 000 750 000 500 000 425 000 10 825 000 % 18.47 18.47 13.86 9.24 9.24 8.31 6.93 6.93 4.62 3.93 100.00

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However, some examples from other countries have shown that expectations from local agencies in entering joint ventures with international partners have not been fulfilled in every case. International partners do indeed bring higher quality standards, but also greater control. International partners tend to take over the majority of shares in local agencies and gradually gain full control over the management. This in the end often spells the disappearance of local agencies and local names in the advertising industries of countries in Eastern and South-East Europe (Jancic and Zabkar, 1998). As has been seen, in the last few years the number of international advertising agencies in Bosnia-Herzegovina has increased. This has resulted in a larger number of agencies that offer integrated solutions to their clients, in particular using public relations, for example, Fabrika and McCann Erickson. In addition, the number of independent media-buying organizations has increased. Another interesting pattern within the advertising sector in Bosnia-Herzegovina is reflected in the fact that, in most of the joint ventures or foreign direct investment-formed agencies, the top managers are foreign: S Team Bates Saatchi & Saatchi Sarajevo, S Team Bates Saatchi & Saatchi Banja Luka, OvationBBDO Sarajevo, OvationBBDO Banja Luka, Pristop Sarajevo, Spem Sarajevo, etc.

Advertisers
In most cases, agency success is strongly correlated with the size and stability of their clients on the market. Local agencies in Bosnia-Herzegovina mostly have local clients, with few exceptions. On the other hand, international agencies mostly work with international clients present in the Bosnia-Herzegovina market. That is often a continuation of their operations in other nearby markets. In this way international agencies stabilize their position in the Bosnia-Herzegovina market from their inception. Research conducted among top advertisers/clients in the Bosnia-Herzegovina market has shown that only a few of them have what could be termed an in-house agency. Among those who possess an internal advertising agency the most important are JP PTT Saobracaja B-H and JP Lutrija B-H (Cicic et al., 2001). These agencies work only for their company but, since they are large advertisers, their role in the sector is significant. JP PTT Saobracaja B-H and JP Lutrija B-H are among the top five advertisers in Bosnia-Herzegovina. Other advertisers with an internal agency are small and not so significant from the sectoral point of view. Table 4 shows the range of advertisers in Bosnia-Herzegovina in the period 19992001 (Public Broadcasting Services of B-H, 2001). In the last 3 years dramatic changes have taken place. Five local companies have disappeared from the list of largest advertisers and international advertisers have taken their place. However, the product categories have remained the same. Among local companies only Lutrija B-H and PTT Saobracaja B-H are still high on the list, among three first players. The products most advertised in Bosnia-Herzegovina are sweepstakes, the lottery, household consumables, hygiene products, telecommunications, food, beverages, cosmetics and cigarettes. The top ten advertisers account for most advertising expenditure in Bosnia-Herzegovina. Apart from Lutrija B-H and PTT B-H, all others are served by four agencies: McCann Erickson, Fabrika, S.V.-RSA and Saatchi & Saatchi, making three international agencies and one local agency. Among the 19 different companies that appear in Table 4, there were seven local and 12 foreign companies. In the top five there are three international and two local advertisers. It is apparent that international agencies are taking over the Bosnia-Herzegovina market and local agencies are becoming less important to the sector in general.

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TABLE 4. The top advertisers in Bosnia-Herzegovina (19992001) Range in 2001 1 2 3 4 5 6 7 8 9 10 N/A N/A N/A N/A N/A N/A N/A N/A N/A Range in 2000 2 N/A 1 3 5 6 N/A N/A 9 N/A 4 7 8 10 N/A N/A N/A N/A N/A Range in 1999 1 2 3 5 4 N/A N/A N/A N/A N/A N/A N/A N/A N/A 6 7 8 9 10 Name JP Lutrija B-H Procter & Gamble JP PTT B-H Coca-Cola Wrigley Henkel Saponia LOreal Ronhill Colgate Palmolive Adria Bolton Group ABDS PIF BIG Pharmamed Unilever Elektroprivreda B-H Energopetrol Sarajevo Fabrika duhana Sarajevo Lijanovici Siroki Brijeg Sodaso Dita Tuzla Origin Bosnia-Herzegovina USA Bosnia-Herzegovina USA USA Germany Croatia France Croatia USA Italy Slovenia Sweden The Netherlands/UK Bosnia-Herzegovina Bosnia-Herzegovina Bosnia-Herzegovina Bosnia-Herzegovina Bosnia-Herzegovina Product category Lottery Consumables Telecommunication Beverages Bubble gum Households cosmetics Households cosmetics Cosmetics Cigarettes Hygiene Food/Hygiene Privatization Pharmacy Household consumables Power generation Petrol retail Cigarettes Food Hygiene

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The dominance of international advertisers and agencies in the Bosnia-Herzegovina market coincides with trade liberalization and opening of the market to foreign goods and services. In the past many trans-national companies, such as Procter & Gamble, Unilever or Colgate, had been selling limited quotas of their products, mostly through local agents or representatives. However, under the new international trade regime in Bosnia-Herzegovina they are given the possibility of importing freely to Bosnia-Herzegovina and using advertising agencies of their choice, often well-known partners from other markets. The transition by international clients from local agencies to international agencies, such as the switch of Coca-Cola from local agency OSSA Sarajevo to international agency McCann-Erickson, does not only mean the transfer of advertising budgets, but also extends an opportunity for international agencies to incorporate and extend local knowledge and presence. This has led to more employment and the hiring of local advertising staff by trans-national advertising agencies. The growth and development of the Bosnia-Herzegovina market and the entry of international companies, in particular producers of food, household hygiene products and cigarettes, has intensified the competition between local and international companies. Many local companies have therefore increased their advertising budget, for example Dita Tuzla, FDS, Lijanovici Siroki Brijeg, Energopetrol Sarajevo and others. However, the participation and growth rates of advertising budgets are still higher in international than local agencies, as seen in the previous tables. Some critics of trans-national advertising have commented on its influence on changing buying and consumption habits in developing countries (MacBride, 1980; Jenkins, 1988). That is criticized in particular due to the tendency of switching consumption from local to the more expensive and luxurious goods offered by international corporations, although analysis here has not (as yet) confirmed any tendencies to these. On the contrary, the largest advertisers in the BosniaHerzegovina market have been corporations that offer ordinary household and staple goods within low price ranges and for standard consumption. A specific problem with local clients in Bosnia-Herzegovina is their instability: many still teeter on the edge of bankruptcy or have serious financial problems. The mortality rate of local companies is high and that is a potential threat for their creditors, among them advertising agencies. An interesting case is Fabrika Sarajevo, which managed to receive some payment from a bankrupt client via a court order, but in a type of barter arrangement it received shampoo production machines. As mentioned already, advertising agency success not only depends on client size and stability, but also on client relationships. Understanding of relationships between an agency and its clients can sometimes indicate success. Trans-national advertising agencies have become dominant in the Bosnia-Herzegovina market through their network of international contacts, relationships and contractual arrangements. If clients are already using a particular international agency in another market that often means automatic cooperation with the new branch of that agency in the Bosnia-Herzegovina market. In this way, clients of international agencies are international advertisers, while local agencies are dependent on local advertisers. Only in one-third of agencies do they become international advertisers. In addition, international agencies very often follow a standard procedure in their business that suits international advertisers, whereas local understanding, habits, culture, language and relationship keep local companies more attached to local agencies. Local agencies, such as Fabrika Sarajevo, MITA Sarajevo and Aquarius Banja Luka, not only have a good relationship with local clients and media, but they also have well-developed personal relationships with the management of local firms. This has enabled local agencies to survive and grow despite very strong international competition. In some cases, international advisors announce a tender for their budget. However, local agencies are still unable to bid on equal terms with competitors, since they do not have enough resources

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or capital. Very often a local agency is only hired for its creative potential and not for the whole budgetary expenditure of advertisers. Recently there have been examples of international corporations offering tenders on a regional level, i.e. for several countries in the region. However, local agencies in principle do not have a network for the region and are unable to compete on these terms. All these factors tend to disadvantage local agencies that are less able to compete than their international competitors. Even when local companies offer tenders, local agencies are not as good in bid preparation and, due to low resources, find it difficult to compete. This is widening the gap between the two groups in the Bosnia-Herzegovina market. Payment terms are characterized by fee discounting from the media for gross time or space amount buying. International clients and agencies often receive more then 15% discount from the media, since they are frequent and large buyers. Meanwhile, local agencies are often obliged to pass on the discount received from the media to their clients due to the nature of their relationship and local habits, thereby reducing the profitability of local agencies to a low level, often below 10%. In most cases, the profit rate for small agencies is between 3 and 5%. In addition, the advertising budgets of local firms are small, so local agencies cannot achieve the leverage for achieving media discounts. In the majority of cases, international clients already have ready-made communication programmes for the media. Often they do not require local production of new advertisements, but only language adaptation. On the other hand, local advertisers have to invest money in production from scratch, without any opportunity for using developed advertisements in other countries or markets. Local advertisers are still oriented to the domestic Bosnia-Herzegovina market and rarely export or advertise their services in other markets. That makes the situation for local agencies more difficult, since they lack the opportunity for entering other markets by following their clients. In 2002, there were several attempts to export services to neighbouring countries that might have required advertising support: all were unsuccessful. However, it is realistic to expect that, in the future, markets will be more liberalized and open, since several bilateral trade agreements in the region have been signed. All should provide also stimulation to advertising agencies to enter wider regional markets and expand networks and relationships. For the time being, however, local agencies are limited to the Bosnia-Herzegovina market. Both international and local advertisers put their money in three major media: television, radio and outdoor media. Television is the most preferable media.

Advertising media
Advertising agencies realize the largest part of their income through media discounts. On average, this contributes more then 75% of their overall income. Liberalization of the Bosnia-Herzegovina media industry after 1995 and the role of the international community here has helped ignite dramatic growth in media development, compared to previous levels. The number of private commercial media is higher then ever, mostly on a local and regional level. None of the Balkan countries or the countries of former Yugoslavia, except Slovenia, which has approximately 900 registered media, have exceeded media growth in Bosnia-Herzegovina (Media Plan Institute, 2001). Such media development has contributed to the development of the advertising industry. Table 5 presents data about the media in Bosnia-Herzegovina (Independent Media Commission, 2000; Media Plan Institute, 2001). Table 5 shows that, in Bosnia-Herzegovina, there are 280 electronic media, which is high and in line with more developed countries, measuring per capita levels (IREX ProMedia, 2000).

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TABLE 5. Media in Bosnia-Herzegovina Media Television Radio Newspapers Magazines Total Number of media in Bosnia-Herzegovina 75 205 30 120 430 Participation in total 17% 48% 7% 28% 100%

A similar situation occurs in the print media. A good example is the capital city of Sarajevo, which, with 350 000 inhabitants, now has three daily newspapers and five magazines. From the advertising viewpoint there are 13 media types in Bosnia-Herzegovina: television, radio, newspapers, magazines, outdoor billboards, direct mail, point of purchase, Yellow Pages, inserts, traffic media (buses, trams, etc.), flyers and other media (film theatres, theatres, waiting halls and lobbies, cafes, etc.). Among the referred media in Bosnia-Herzegovina, three are predominant: television first, then radio and then billboards. These three media cover over 90% of all expenditure in the advertising media in Bosnia-Herzegovina. Television accounts for 65% of all expenditure. Newspapers, magazines and other media are not particularly strong and use of the Internet is still embryonic (see Table 6): The largest advertising media in Bosnia-Herzegovina is Federal TV (FTV), formerly BHT. This station has the largest view percentage in the country. The share of FTV on the media market in Bosnia-Herzegovina is approximately 31% (Public Broadcasting Services of B-H, 2001). The problem with electronic media is the lack of a national media that covers the whole country. Since the market is fragmented, media and its advertising are very much oriented locally. There are attempts, though, to develop national media with a wider coverage within Bosnia-Herzegovina, which would break local or regional limitations. The assessment is that 77% of households in Bosnia-Herzegovina have colour television and 92% of households have radios, while 13% of wealthier households can access satellite television. A large number of households in Bosnia-Herzegovina can receive Croatian and Serbian television stations signals, either through local stations or by direct reception of signal, in the border regions in particular (US Embassy, 1999). Due to low standards of living and a high unemployment rate, in particular in rural areas, many families in Bosnia-Herzegovina do not buy newspapers and magazines and, thus, take all their information from electronic media. These facts alone could explain why advertising expenditure
TABLE 6. Advertising expenditures by media in Bosnia-Herzegovina in 2000 Media Television Outdoor Radio Newspapers Total Expenditure in US$ millions 9.75 3.0 1.2 1.05 15.0 Participation in total expenditure 65% 20% 8% 7% 100%

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for the television media is so high. Public service television tends to remain dominant, but commercial stations are becoming more numerous, stronger and better organized. In particular, local private television stations are becoming quite successful in local market coverage and, thus, attracting local advertisers. Some stations are also involved in direct marketing actions through infomercials, for example Teleshop. Radio continues to be very popular and has a wide audience reach. Almost every city and town in Bosnia-Herzegovina has at least one radio station that offers advertising services to local advertisers. The best-known electronic media in Bosnia-Herzegovina are Federal RTV, RTV Republic Srpska, TV Hayat, OBN, Studio 99, Independent TV Banja Luka, TV Tuzla Canton Tuzla and Alternative TV Banja Luka. Newspapers as advertising media are invariably used locally. The printed media market is characterized by a large number of papers with low circulation. For example, over 350 print medias were registered from 1992 to 1998. A good number of these were short-lived. At present in 2003 there are 15 daily and weekly newspapers and approximately 60 magazines. In addition, newspapers and magazines from Croatia and Serbia are widely distributed throughout Bosnia-Herzegovina, competing with the local media. Thus, today in Bosnia-Herzegovina there are 150 print media, with 30 newspapers (15 local and 15 foreign) and approximately 120 magazines (60 local and 60 foreign). However, newspaper circulation in Bosnia-Herzegovina is low. The reasons are manifold: the market is fragmented by political and ethnic factors and there are underdeveloped distribution channels and weak logistics. Therefore, newspapers are mostly distributed locally. There is a need for a national distribution network across the whole country. Magazines are considered expensive, since the economic situation is poor. Thus, their circulation is also low. Some business magazines, such as Business Magazine Sarajevo, Poslovne novine Sarajevo, Poslovni uspjeh Tuzla and BH Privrednik Vitez, are well accepted by businessmen in Bosnia-Herzegovina. Advertising papers and Yellow Pages are popular media for advertising, as well as business advisories. Research Agency MIB (2000) conducted research on the situation of the market of printed media in Bosnia-Herzegovina. The leading daily newspaper in Bosnia-Herzegovina is Dnevni Avaz from Sarajevo. Next are Oslobodjenje, Sarajevo and Jutarnji list from Zagreb. Nezavisne novine from Banja Luka occupies a small percentage of the market. Among the magazines, the market leader is BH Dani (7.4%), then Slobodna Bosna (6.4%), both from Sarajevo and then Reporter from Banja Luka (4.9%). The most successful and fast growing new media in Bosnia-Herzegovina are outdoor media, such as city lights, billboards, wallboards, etc. In 2000 the expenditure for such media was approximately US$3 million, which accounts for approximately 20% of the total advertising expenditure. The best known in this sector is Europlakat Sarajevo with an annual turnover of US$2 million, which makes it one of the largest media in general in Bosnia-Herzegovina.

Research and other organizations

Mareco Index BosniaMIB, Sarajevo, a member of Gallup and the European Society for Opinion and Marketing Research (ESOMAR), is the best known among the companies that specialize in research for advertising planning. Lately, part of the research in this field has been conductd by the agency Prism Research Sarajevo. Mareco Index Bosnia is the first media and public opinion research agency in BosniaHerzegovina. It was set up in 1996 as a joint venture by 3D Systems from the USA, Austrian Gallup and the British Balkan Social Survey, a British firm located in Sofia. Mareco Index Bosnia has several research programmes in Bosnia-Herzegovina, but the most important is the media

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research B-H Media Market Monitor, which offers statistical information about the media industry situation and media market structure in the whole of Bosnia-Herzegovina. The project uses the standards of the Gallup International network from the Institute for Social Research. The sample size is 5000 respondents and the method of collection is by diary. ADVERTISING SECTOR REGULATION IN BOSNIA-HERZEGOVINA Regulation of the advertising sector differs from country to country, but in general there are three regulators regulating or monitoring the sector: the government, media and agency organizations and consumer interest groups.

Government administration and regulation

There is no ministry, governmental unit or agency exclusively in charge of the advertising sector in Bosnia-Herzegovina. However, various ministries could affect the industry from different angles. For example, the Ministry for Traffic and Transportation could influence the conditions for outdoor or traffic advertising in terms of setting up the terms for visibility, public security and safety in the traffic related to advertising. However, there are really no restrictions for registration of the advertising business in BosniaHerzegovina. However, each start-up must be registered with the respective government department in order to obtain a permit and register their business with the court. In addition, if the business is a joint venture, it has to be registered and approved by the respective government office. Media law is probably the main regulation for the advertising industry in Bosnia-Herzegovina. The law sets basic advertising rules in both public and private media. Other laws are also relevant for the advertising industry. Particular products, such as cigarettes, medicines and alcoholic drinks, are subject to special conditions of advertising. The law about the restrictive use of tobacco products stipulates very limited advertising of tobacco products and forbids cigarette brand advertising. An unfortunate fact is that this law is often breached, since cigarette advertising in Bosnia-Herzegovina is rather intensive (Brkic, 2001). Bosnia-Herzegovina has a special regulatory agency for communication and media (The Communications Regulatory Agency (CRA)), set up by the International High Representative (Office of High Representative), which has very wide authority in media regulation and monitoring. The task of the agency is to monitor the characteristics and work of all media in Bosnia-Herzegovina and, based on established criteria, to issue or extend permits for work. With such authority, the CRA has many direct and indirect influences on the advertising industry as well.

Advertisers associations and self-regulation in the sector

Some critics of trans-national advertising, Fejes (1980) for example, have emphasized that foreign advertising agencies dominate the sector by using different techniques. One of them is dominance in the national or regional advertising associations. Bosnia-Herzegovina does not have a formal association for advertising, nor for marketing. Before 1992 there was the Association of Advertisers, which was part of a wider association on the Yugoslav level. The Yugoslav Association for Marketing, which was composed of academics and professionals, also had a very significant role. In May 2001 the unit of International Advertising Associations was formed in Bosnia-Herzegovina. This is the first organization in Bosnia-Herzegovina since 1992 to bring advertisers, media and

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agencies together in Bosnia-Herzegovina. Although still very young, the association is important for promotion of the idea about the need for better and wider representation of the sector in Bosnia-Herzegovina. In the field of printed media a council of printed media was organized in the autumn of 2001 with the task of promoting ethical principles in journalism and professional standards in the print media in Bosnia-Herzegovina. The council does not have the authority of a regulatory agency and it is not recognized as an international organization. Bosnia-Herzegovina participated in the International Festival of Market Communications in the period 19971999 in Tuzla. The organizer was the marketing organization PROMO International from Tuzla. The festival had three parts: (1) competitive, where the best advertisements of the year were selected, (2) educational, where training for staff in marketing and advertising was organized and (3) an overall review. However, this festival has not been held since 1999, perhaps because of lack of participation. The association of painters and applied artistry in Bosnia-Herzegovina (ULUPU (Udruzenje likovnih umjetnika primjenjene umjetnosti) B-H) also has some association with advertising practice in Bosnia-Herzegovina, since all creative people in advertising are at the same time members of ULUPU.

Consumer interest groups

There are several public interest groups of consumers involved in some way in the supervision, monitoring or influencing advertising practice. These groups are consumers associations, non-smoker associations, children protection associations, women associations and cultural associations. However, it is important to say that governmental regulation and self-regulation within the sector are not insufficiently developed in Bosnia-Herzegovina. That also counts for the consumers associations and other public interest groups. All these groups should play a more active role in the development of a transparent and stimulating regulatory framework. The ultimate responsibility lies with the various constituent publics with an interest in advertising to improve professional and ethical standards. CONCLUSIONS

Advertising in Bosnia-Herzegovina
During the last decade political and economic factors have determined the development of the advertising industry in Bosnia-Herzegovina. Prior to 1992, Bosnia-Herzegovina was developing as a heavy industry and raw materials supplier to the Yugoslav market and the services sector, including advertising, was ignored and neglected. At that time, of course, no international advertising agencies were present in the Bosnia-Herzegovina market for self-evident reasons. Following the war, advertising industry development recommenced in 1995 and 1996, after hostilities were finally subdued. Along with many other sectors of the economy, the advertising industry has experienced a transformation from an underdeveloped and local level to a somewhat international character. Due to market liberalization and international trade, international agencies and clients have entered the market. This also contributed to the significant development and growth of the media sector in Bosnia-Herzegovina. Today, there are 23 advertising agencies active in the Bosnia-Herzegovina market in the field of advertising and marketing communications. The annual advertising expenditure increased

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from US$6 million in 1996 to US$15 million in 2000, with a further forecast that in 2001 the expenditure would grow to US$20 million. Currently, ten trans-national agencies are present in the Bosnia-Herzegovina market through direct investment or joint ventures with local companies. Five of the 20 largest global advertising agencies have branches in Bosnia-Herzegovina including McCann Erickson, Saatchi & Saatchi, J. Walter Thompson, Foot, Cone & Belding and BBDO. This paper has indicated that Bosnia-Herzegovina has entered a period of trans-national agencies dominance over the advertising market. In 2000, such agencies controlled more than two-thirds of the total expenditure on advertising in Bosnia-Herzegovina.

Trans-national advertising agencies influence on the local advertising scene

The liberalization of the economy, market and advertising industry in the mid 1990s has brought forward the question of the positive and negative aspects of the entry of international agencies and their effect on other players in the market. Two major approaches, modernization and dependency, present some basic arguments about the effects of trans-national corporations entry on the local advertising industry in transitional economies (Schiller, 1976; Fejes, 1980; Boyd-Barrett, 1982). However, it seems evident that there are several very positive effects. These include the introduction of modern advertising concepts to the Bosnia-Herzegovina market and the promotion of a more professional approach and the use of social science methodologies. It is certain that the entry of international competitors into the advertising market in Bosnia-Herzegovina has brought more professionalism, higher service quality, more respectability and higher standards. Of course, the market, despite its growth, is still almost in stage 1 of the ubiquitous product life cycle. Growth in the advertising sector has also provided more job opportunities and employment and a wider base for human resource development. Further, this growth has stimulated cooperation of the industry with the Faculty of Economics, University of Sarajevo, which has resulted in the setting up of programmes of study in advertising and marketing communications. More young and talented undergraduates opt for advertising and marketing communications as a potential career track. The dominance of international agencies and their prevalent market share can also be seen negatively as local media are becoming very dependent on international agencies. On the other hand, it is a fact that more local people are being given the chance of managing and leading trans-national agencies, even though top positions are still occupied by foreign experts. Consolidation of the media sector, television and radio, may result in a market that moves from the sales concept (media) to the buying concept (advertisers and agencies).

Will Bosnia-Herzegovinas advertising grow further?

After double-figure growth in the last 6 years, the rapid growth of Bosnia-Herzegovinas advertising is unlikely to continue. There are four elements affecting that development. (1) The overall growth and development of the economy and market. (2) The potential introduction of Bosnia-Herzegovina as a regional media centre for South-East Europe. (3) The accession of Bosnia-Herzegovina to the World Trade Organization (WTO). (4) An increase in number of media choice options. The development and growth of the Bosnia-Herzegovina market could be a generator for future development of the advertising sector. As a first step, market development should stimulate more

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intensive market orientation of local companies. That would lead to more usage of communication tools and an increase in advertising budgets. Further, privatization of successful companies and a more competitive environment brings more advertising. In particular, telecommunication companies are becoming very active in advertising. Experience from the neighbouring country of Croatia presents very exciting opportunities where the telecommunication sector leads advertising expenditure. In addition, the entrance of other international companies with significant advertising budgets is expected and, in conjunction with increasing local purchasing power, it would also mean more advertising. In particular, this should affect product advertising for motor vehicles, fashion clothes, perfumery, hotels, transportation services, jewellery, beverages and other product categories. A plethora of activities in the area of media building and development in Bosnia-Herzegovina in the last 5 years has brought in a number of institutions of regional importance, such as the Soros Media Center, First University of Communications, High School of Journalism and BBC School of Journalism. There is an ongoing effort to set up a school for media management that could eventually be transformed to a modern academy for media and management. This would be a private capital initiative. In addition, numerous governmental and non-governmental media development organizations are located in Sarajevo and other major centres across Bosnia-Herzegovina. Advertising industry development will also by affected by the accession of Bosnia-Herzegovina to the WTO. That accession means further liberalization of the national and local markets and more possibilities for global brand entry. Either way, new brand entry or competition for already established brands indicates further growth for advertising agencies and their client companies. However, that will inevitably result in harsher competition for local producers, i.e. small-scale advertisers that may, in fact, be eliminated entirely. Finally, the fourth factor of advertising sector development is the constant growth of media organizations. The market has experienced dramatic changes since 1990. Before market liberalization Bosnia-Herzegovina had a very limited number of both media organizations and capabilities in media coverage and creation. Political and economic liberalization, in conjunction with stronger consumer purchasing power, has caused large media diversification, from magazines to satellite and cable television. Stronger capacities and diversification have offered more options in covering the advertising needs of various market segment and niches. This base in turn offers more potential and options in advertising to new investors and foreign companies entering the market.

The structure of the Bosnia-Herzegovina advertising market in the future: will trans-national advertising agencies continue to dominate the sector?
Trans-national advertising agencies will continue to dominate the advertising market in BosniaHerzegovina, with ever-stronger market shares, unforeseen circumstances aside. There are several factors determining such a prognosis and they include the following. (1) (2) (3) (4) (5) (6) Greater economic liberalization. Lower and few barriers to entry. Established relationships between new market entrants and servicing agencies. Further use of joint ventures and cooperative arrangements. Further decline in locally owned agencies. Unfair competitive practices, i.e. trans-national advertising agencies can avoid taxation in Bosnia-Herzegovina via their outpost in Croatia and Serbia. (7) Trans-national advertising agencies use of integrated marketing communications apparently marketed in such a way as to better satisfy client needs.

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(8) Greater use of the entire range of promotional mix elements. (9) The emergence and use of cost-effective media buying. (10) The continuing trend of trans-national advertising agencies active involvement in local business and professional associations (for negative effects see MacBride, 1980; Jefkins, 1988). However, as positive outcomes from this analysis for the advertising industry in BosniaHerzegovina there are indicators that the original relationship with local agencies featured by dependency is transforming itself to more equal partnership cooperation. Most agencies in Bosnia-Herzegovina, whether foreign or local by ownership, are staffed with local people, including managers. There are many examples of adaptation of practices to local consumers and their preferences. The process could be termed advertising localization and brings about more positive connotations to development here. Trans-national advertising agencies are expected to develop local networks, mostly in terms of hiring local managers with a good knowledge of the local market and good contacts, just to attract local business. This research shows that a majority of the trans-national advertising agencies are replacing initially imported staff with national recruitment. For the future, most trans-national advertising agencies plan to expand the local client base and income. Finally, with the introduction of trans-national advertising agencies to the Bosnia-Herzegovina market, quality standards and creativity in the advertising industry have been significantly improved. It could be stated that a respectable sector has emerged in the last 5 years. In particular, the advertising production subsector has excelled, with a rather unique recognizable style, stemming from prevailing cultural local traits. Some agencies, such as Fabrika Sarajevo or Creative Center Kardea, are on the verge of competing with regional and global competitors in terms of creative solutions and the quality of their work. Thus, we have a reborn advertising industry. Admittedly, it is tiny in scope and scale. It is dominated by trans-national advertising agencies, but gradually more and more local employees are gaining experience and knowledge in this sector of the Bosnia-Herzegovina market. From such a rebirth, there are positive expectations for the future. REFERENCES
Boyd-Barrett, J.O. (1982) Cultural dependency and the mass media. In M. Gurovitch, T. Barnet, J. Current and J. Woollacott (eds) Culture, Society and the Media. London: Routledge, pp. 17495. Brkic, N. (2001) Smartly noted forbidden ads. Media Online, 19 July (available at www.mediaplan.ba). Central Intelligence Agency (2000) The World Factbook 2000, (available at www.cia.gov). Cicic, M., Brkic, N. and Muslim, K. (2001) Decision-making rationality among the larger advertisers in B-H. Internal paper, Faculty of Economics, University of Sarajevo. Ducoffe, R. and Smith, S.J. (1993) Mergers and acquisitions among advertising agencies. In A. Alexander, J. Owers and R. Carveth (eds) Media Economics: Theory and Practice. Hillsdale, NJ: Lawrence Erlbaum Associates, pp. 24355. Fejes, F. (1980) The growth of multinational advertising agencies in Latin America. Journal of Communication 30(3), 3649. Independent Media Commission (2000) IMC Public Registrar. Sarajevo: Independent Media Commission. IREX ProMedia (2000) Bosnia and Herzegovina Media Analysis. IREX ProMedia. Jancic, Z. and Zabkar, V. (1998) Establishing marketing relationship in the advertising agency business: a transitional economy case. Journal of Advertising Research 38(6), 2736. Jenkins, R. (1988) Trans national corporations and third world consumption: implications of competitive strategies. World Development 16(11), 136370.

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MacBride, S. (ed.) (1980) Many Voices, One World: Communication and Society, Today and Tomorrow. New York: Unipub. Media Plan Institute (2001) Media News. Sarajevo: Media Plan Institute. Public Broadcasting Services of B-H (2001) Marketing Sectors Report. Sarajevo: Public Broadcasting Services of B-H. Research Agency MIB (2001) Bosnia and Herzegovina Media Market Monitor 2000. Sarajevo: Research Agency MIB. Schiller, H.I. (1976) Communication and Cultural Domination. White Plaints, NY: International Arts and Science Press. US Embassy (1999) Country Commercial Guide for B-H. Sarajevo: US Embassy, 1999. World Bank (2000) Data and Statistics (available at www.worldbank.org). Zenith Media (1999) Advertising Expenditure Forecasts (available at www.zenithoptimedia.com).

BIOGRAPHIES Dr Muris Cicic is a professor of marketing in the department of marketing at the University of Sarajevo. He was previously located in the department of marketing at the University of Wollongong, Australia. Dr Cicic has contributed to numerous journals, including the Journal of Advertising Research, Journal of International Marketing, Journal of Global Marketing, Journal of Business Ethics and the European Journal of Marketing. He has also contributed chapters and case studies to several academic books and papers to many conference proceedings. Dr Nenad Brkic is an assistant professor in the department of marketing at the University of Sarajevo. He has a strong interest in marketing communications and has contributed chapters and case studies to several academic books and papers to many conference proceedings around the world.