Dentsu Plans to Cut 30% of Overseas Subsidiaries by 2028

Consolidation Amid Shifting Competitive Terrain

Dentsu Group announced Friday plans to reduce its overseas subsidiaries by as much as 30% before the end of fiscal 2028, marking one of the most significant restructurings in the Japanese advertising giant's international operations. The move comes as the company confronts mounting pressure from consulting firms and technology companies that have entered the advertising market armed with AI capabilities.

The Tokyo-based group, which operates a sprawling network of agencies outside Japan, is working to consolidate what it describes as a fragmented collection of international businesses. The restructuring aims to restore profitability after the company swung to a profit in the January-June period, recovering from losses during the same timeframe a year earlier, according to Dentsu.

New Competitors Reshape the Market

Traditional advertising agencies now find themselves competing against firms with different core competencies. Accenture, the global consulting firm, has built a substantial presence in marketing services through acquisitions and organic growth. Google, meanwhile, leverages its dominant position in digital advertising infrastructure and increasingly sophisticated AI tools that allow brands to automate campaign creation and optimization.

These competitors bring capabilities that traditional agencies have struggled to replicate at scale. Consulting firms offer end-to-end business transformation alongside marketing services, while technology platforms provide data analytics and automation that reduce the need for labor-intensive campaign management.

Structural Reform in Progress

Dentsu's international business has long been characterized by a decentralized structure, with numerous subsidiaries operating semi-independently across markets. This model provided local market expertise but created redundancies and made it difficult to deploy technology and talent efficiently across the network.

The planned reduction will consolidate overlapping operations and eliminate units that no longer fit the company's strategic direction. Dentsu has not specified which markets or service lines will see the deepest cuts, but the scale of the reduction suggests significant operational changes across its international footprint.

The company's return to profitability in the first half of this year provides some breathing room for the restructuring effort. However, the competitive pressure from AI-enabled rivals continues to intensify, with automated tools increasingly capable of handling tasks that once required teams of creative and media planning professionals.

The AI Factor

Artificial intelligence has fundamentally altered the economics of advertising services. Generative AI can now produce creative concepts, write copy, and generate images at a fraction of the cost and time required by human teams. Programmatic advertising platforms use machine learning to optimize media buying in real time, reducing the value of traditional agency expertise in media planning.

For a company like Dentsu, which built its business model on labor-intensive services delivered through local market specialists, these technological shifts threaten core revenue streams. The subsidiary reduction reflects an acknowledgment that the old model cannot compete on cost or speed against AI-powered alternatives.

The restructuring also positions Dentsu to invest more heavily in its own technology capabilities. By consolidating operations, the company can redirect resources toward building or acquiring AI tools that allow it to compete with technology firms on more equal footing.

Asia's Advertising Outlook

Japan's advertising market has faced structural headwinds for years, with declining traditional media consumption and intense competition for digital advertising budgets. Dentsu's domestic business remains profitable, but growth prospects are limited. The company's international operations, particularly in faster-growing Asian markets, represent a critical path to expansion.

The restructuring may allow Dentsu to focus resources on markets with stronger growth potential while exiting or consolidating operations in mature markets where margins have compressed. The company has not disclosed the geographic distribution of planned subsidiary reductions, but the strategic logic points toward concentration in high-growth regions where scale advantages matter most.