Advertising Budgeting Methods and Processes in China

By absorbing advanced knowledge and business practices from their overseas partners, international joint ventures (IJVs) have helped the development of many aspects of Chinese business. Do IJVs in China use more sophisticated advertising budgeting methods than their local counterparts? To test this, a construct was devised to measure budgetary sophistication, taking into account the tendency of firms to use multiple methods. Then, personal interviews were conducted with over 200 advertisers in China, representing a mix of Chinese state-owned enterprises (CSOEs), IJVs, and private companies. Their budgeting sophistication scores were then related to demographic, attitudinal, and behavioral variables. Results showed that the most common budgeting method used was "judgmental" and the most common decision-making process was "bottom-up, top-down." On average, firms used more than two budgeting methods. IJVs and firms that adjust their budgeting methods for different profitability levels used more sophisticated budgeting methods. Theoretical implications are discussed, and recommendations are made for firms that are working in or considering entering the Chinese market.