Examination of Witnesses (Questions 320
TUESDAY 15 MAY 2007
Q320 Chairman: Sir Martin, good morning
and welcome to our inquiry into globalisation and its impact on
the global economy. I am delighted we are able to have this occasion.
As you know, you and I were speaking at an event and you were
talking about your company and how you were setting up for the
future, particularly taking account of Asia, the Pacific and other
areas. Do we have it right in how we are going about globalisation?
Do we have proper policies that are going to be in place or do
we need a bit of a wake-up call?
Sir Martin Sorrell: Thank you
for the opportunity of giving you the benefit, if it is a benefit,
of our thinking or, I guess, the thinking of the parent company
of WPP. I think you have been given a copy of our annual report
but maybe I should just say a little bit about the company, so
you know how our views are formed. We are a public company listed
in New York and London, capitalised now at about US $19 billion
(£9.5 billion). We started 21 years ago with two people in
one room and we now have 100,000 people including associates (about
82,000/83,000 excluding those associates), associates being companies
where we own 20 to 50% or less than 50%. We have 40% of our business
in the US and 40% in Europe and 20% in Asia, Latin-America, Africa
and the Middle East and Central and Eastern Europe. Half our business
is in advertising and half outside and one-third in what we call
measurable activities, such as market research and direct, interactive
and internet. Our biggest clients are Ford Motor Company, Unilever,
Proctor, IBM, Pfizer. Those would be our top five. American Express,
Nestlé, Kellogg's, Kodak, Vodafone, HSB, AZ, GSK are all
examples of companies, so major multinational companies. We work
with 300 of the Fortune 500. We have three strategic objectives,
which are very important in the context of what you just asked.
The first is that we are currently 40:40:20, as I said, in terms
of Europe, US and the rest of the world -in what I would call
the faster growing markets, not the emerging markets. I think
it is somewhat demeaning to call them emerging markets. Our strategic
objective over the next five to 10 years is to be one-third:one-third:one-third,
so a third in US, a third in Europe and a third in Asia, Latin-America,
Africa, Middle East and Central and Eastern Europe. I would draw
a distinction in Europe between the West of Europe, which is slow
growth, and Central and Eastern Europe, which is fast growth.
In fact, I think the world is growing at three speeds: Asia and
those other areas I just mentioned that have the fastest growth;
the US which is middle range; and poor old Western Europe, about
whichto the heart of your questionI remain somewhat
cynical and very concerned about. There is less significant strategic
and structural change, which is obviously in the remit of your
committee, to think about. Unless there is significant strategic
and structural change, I think Western Europe will lag the other
areas of the world. I think the US is still a big question mark.
If we went back to the 1980s, pre-Reagan, people were forecasting
the demise of the US in anticipation of Japanese competition.
We have seen, subsequent to that, that Japan has stalled significantly.
It may have recovered in the last two or three years, but it had
12 years when the second biggest economic engine in the world
was stalled and not moving ahead. That is one objective. Why do
we want to be one-third in Asia, et cetera? It is very simple:
two-thirds of the population will be in Asia by 2014. I believe
the shift in wealth from West to East is an inexorable process:
there is a 200-year historic swing. I struggled with economics
at university and I am not a great historian, but if you look
back there are economies that have theories about long-term cyclical
swings and I think most of them have stopped at 50 years. I think
this is a 200-year swing. If you go back to the 1820s or the early
19th century and you look at what was happening with Meissen and
Wedgwood in the china industry, for example, they undermined the
Chinese porcelain industry in the early 19th century. Exactly
the same thing happened then as is happening now. It is not low-cost
manufacturing in the East, by the way. This is high quality manufacturing
at a price. This is very competitive manufacturing at a price.
Of course in the service industries, India is also extremely competitive.
If you go back to the early 19th century, China and India accounted
for about 49% of worldwide GNP. By about 2015 or 2025, or whatever
the date is, China and India will yet again account for about
40% of worldwide GNP. I think this is an inexorable swing that
you cannot reverse, so I am very interested to hear and see what
you will produce ultimately as your recommendations as to how
the UK and Western Europe can participate in global growth because
I think it is a very difficult thing to arrest. That is one of
our objectives. Turning to our second objective, there are two
big challenges that we face as a business. One is global growth.
How do we position ourselves effectively in the faster growing
markets of the world? The second thing is technological change
and the growth, particularly in our industry, of new mediathe
fragmentation of media, the growth of the internet and mobile,
alternative technologies for our clients in order to advertise
in the market products. Currently, about half our business is
in traditional advertising: TV, radio, outdoor newspapers and
magazines; and half is outside, in areas such as public relations
and public affairs, branding and identity, healthcare communications,
direct, interactive and internet, and information, insight consultancy
(which is a sort of posh phrase for market research). Our objective
over the next five to 10 years is for two-thirds of our business
to be outside the traditional areas. Why? The cost of network
television continues to increase faster than general price inflation
and the fragmentation of the media and the growth in new technologies.
Then there is our third objective. Currently, our revenues are
about $11 billion our billings are about $50 billion. About one-third
of our business is in what we call measurable areas; that would
be direct, interactive and the internet, the growing new technologies
and market research. We want that to be half our business. Why?
Because we think the measurability in our business is becoming
more and more important. In summary, if you said to me: "Where
would you like WPP to be in five to 10 years?" I would say:
"More Asian, more Latin-American, more African and Middle
East and more Central and Eastern European, more outside the traditional
media areas and the new technologies and more measurable in terms
of research direct, interactive and internet." That is a
sort of overview. We account for about 25% to 30% of all media
purchases in the world. That is not our statistic; that is a statistic
of a French research company called RECMA which tracks market
share. For example, here in the UK we are about one-quarter of
ITV's revenue, about one-third of News Corp revenue or Associated
Newspapers, any of the newspaper groups here. In India, we are
50% of the market: we have the leading market share. In China
we are 15%. We are the biggest purchaser of media, of CCTV and
the Shanghai Media Group. In Japan we are number three in the
market. But in most major markets in the world, Brazil, Russia,
India and Chinathe BRICs as they are known, or BRICIincluding
Indonesia, because we think Indonesia is a very important rapidly
growing marketwe are about 25% to 30% of the market. In
Italy we are 45%. In Germany we are about 40%. So we have very
big media shares in those markets of the world. Just coming back
to the shift from West to East for a minute, just to give you
some of the scale issues, China, in our view, is not 1.3 billion
people, it is 1.5 billion people. If you look at the official
statistics, they consistently underestimate. The Chinese have
a fond habit of underestimating their position, whether it be
GNP growth or population but we reckon about 1.5 billion people.
It is true that only 150 million to 200 million of the Chinese
population are interested probably in the products and services
that our clients wish to sell, but if you think about that that
is two-thirds of an America and it is a dynamic situation which
is changing very rapidly. India is not dissimilar: it is about
1.1 billion people. Each country is not one country: China has
32 provinces and India has about 27 states. Our strategy in China
is a regional strategy. We are in 12 major cities. There are 184
cities in China of over one million people. There are many cities
beyond that that have populations of over half a million. The
same thing is true of India. Our penetration in the Indian market
goes way beyond New Delhi or Mumbai or Bangalore; it goes into
the heartland and we have arrangements with the rural sales forces.
In China, we have a commercial arrangement with the Young Communist
League where we work with them for marketing exercises. The membership
of the Young Communist League is 70 million people. I mention
this as scale. As one other observation on scale, in China there
are currently 468 million subscribers for mobile in China. There
are 300 million subscribers alone with one mobile company, China
Mobile. Together with the Financial Times, we value companies
on a worldwide basis every year. We published that with the FT
about a week or so ago and China Mobile is in the top five brands
in the world and has 300 million subscribers, which is equivalent
to the population of the United States. I go through that just
to demonstrate the scale of change that is taking place. We are
at the beginnings of it. Will there be bumps in these rapidly
growing marketsnot just Asia, Latin-America, the Middle
East, Russia and the CIS countries and the other CIS countries?
There will be. But we as a global company will invest in those
bumps, if I may put it like that. In fact, I would like there
to be a few bumps in China and India because it would discourage
our competition and leave the way clearer for us in order to penetrate
even further. I hate to be depressing and I hate to be negative
but I think the task this Committee has a pretty awesome one to
try to arrest it. There are areas obviously on which one can focus,
such as education, research and development, taxation and the
like, but to sum it upand to shut up for a secondI
think this is an inexorable process. The shift from West to East
is very difficult for us to compete against. We are sitting here
today as Cerberus acquire Chrysler. When you look at that and
you compare it to the growth and development of countriesand
I think countries and companies are very similarwhat Western
Europe represents to me or to our company is a mature set of economies,
challenged, just like companies, with healthcare issues, pension
issues. There is a sort of lack of dynamism which I think is very
difficult to combat. It may be it is best to have a happier life
rather than a better economic life and it may be that a 35-hour
week is the way that we should all go, but you have to understand
the implications of that.
Q321 Chairman: Thank you very much
for that broad sweep. My colleagues have quite a number of questions,
so I would ask them for short questions and perhaps you could
give a more pithy answer.
Sir Martin Sorrell: It is very
difficult for me to give pithy answers!
Q322 Mr Newmark: I know you were
a leading light in giving interviews on dot.com in the late 1990s.
In an interview in fastcompany.com in 1999 you said: "What
we're experieincing is not just the globalisation but rather the
Americanization of the world economy." I am wondering if
you think this statement still holds true in 2007.
Sir Martin Sorrell: It is dangerous
to be reminded of what one said about eight years ago. Americanization
has shifted. If you look at our business, as I said, 40% of it
is US and I could say that probably 50% or two-thirds is controlledand
it is not politically correct to talk in major corporations about
control from the centre but it is certainly influenced from the
centre still, from the US, but I think we are now witnessing a
change. It is not Americanization; however, it is true globalisation.
Who would have thought that an Indian company would buy British
Steel? Tata bought British Steel, renamed Corus, which was the
merger of Hoogovens, a Dutch company, and British Steel. Who would
have thought Tata would buy that and the under-bidder would be
a Brazilian company? The challenge on a global stage is no longer
solely an American challenge, or, indeed a Western European one.
It is not solely a Japanese challenge. It is the challenge from
the South Korean chaebol, LG, Samsung, Hyundai, SK. It is the
challenge from Chinese companies such as Haier, Lenovo, Bird,
a whole load of them.
Q323 Mr Newmark: But if you want
to build a global brand, do you still have to dominate the US
Sir Martin Sorrell: You still
have to have a very significant presence in the US market but
the balance is changing. If I look at our business, say, last
year, where did we see the fastest growth? We saw it in China
25%, India 20-25%, Russia 35%, the Middle East 25%. These other
parts of the world are becoming significantly more important.
Whilst the US is still very important, it is a bit like is television
still important? The answer is yes.
Q324 Mr Newmark: But television,
effectively, is increasing dominated by American sitcom, sitcom
shows and so on. You talk about the growth in India and China,
do you think this will be a counterveiling force against the Americanization
of the world economy? That is not necessarily the ownership of
products which you were talking about but American culture and
so on influencing what is going on in India and China.
Sir Martin Sorrell: I think you
willthe growth of Bollywood, for example, in the film industry.
It is inconceivable for me that 1.5 billion or 1.3 billion will
not be capable of producing and are already capable of producing.
We are just printing today our latest annual report which will
have significant Chinese painting represented in it. It is inconceivable
that Chinese film, art, theatre, dance, advertising and marketing
will not become significant on a worldwide stage. The same applies
for India. It would be arrogant and rather complacent of us and
the Americans to believe that we will continue to dominate those
industries when there is such a wealth of talent and people available.
I think the answer is it will become much more balanced, just
like in a technology sense network television will no longer be
the dominate force that it was. It will be a force but it will
not be the only force. The internet and the web and other technologies
no doubt in the course of time will become increasingly important.
Q325 Mr Fallon: Perhaps I could turn
to your annual report, Sir Martin, which I note, despite all your
pessimism, is printed in my constituencyand we are grateful
for the business. You describe the biggest long-term issue facing
your clients as overcapacity. I am a bit puzzled about that. You
have talked already this morning about growing consumer markets
in places where there were not consumer markets before. Are the
new consumers in China and India not going to take up a lot of
Sir Martin Sorrell: If I take
our largest client, Ford Motor Company, which is one of the big
three, it faces an industry where the demand for cars and trucks
is around 60 million units in the world and the supply of cars
and trucks is 80 million. If I look at most industries in which
we operate, there is a similar situation: there is significant
overcapacity, certainly in the West. We are seeing in the East
a growth of alternative sources of supply. The Geely car company,
a Chinese company, will probably launch a four-door sedan in the
United States at under $10,000 in 2008. This will be a significant
competitor. Ratan Tatawho is the Henry Ford of India, I
guessis producing a Tata car for lower income groups and
will become a major source of supply. Most of the Chinese motor
companies will become significant exporters and they are expanding
capacity. So alternative sources of supply, lower-cost sources
of supply, as we would call itand we see that in services
also in terms of outsourcingare being built, not just in
Asia but in Latin-America, in Africa and the Middle East and in
Central and Eastern Europe. I have focused a lot on Asia. Do not
ignore Russia and the other CIS countries. Do not ignore Africa
and the Middle East. Two things have happened in Africa over the
last year or so which I think are very interesting. Firstly, Gaddafi
has had a volte-face in Libya, and increasing interest, for example,
in the oil industry and the sources of supply and energy in that
part of the world. The growth that we have seen in Egypt in the
last year or so has been very significant indeed in the course
of our industry. You may think this is a frivolous comment, but
the World Cup in 2010 in South Africa I think will not be as important
as Beijing 2008 in terms of Chinese development, but will be significant
in the course of development in South Africa. The Chinese influence
in South America and in Africa is becoming more and more interesting
and is focusing a lot of Western government attention and US attention
on the potential growth in those parts of the world. As I look
at the power balance, it is not just a question of Asia and the
overcapacity issue or the growth of capacity is not going to be
just confined to Asia but other parts of the world.
Q326 Mr Fallon: It is not a zero-sum
game. Not only have you got these new consumer markets evolving
but the population is going to grow. When my sons are the same
age as I am now there are going to be 9 billion people instead
of 6.5 billion.
Sir Martin Sorrell: Yes, but it
is a zero-sum game, I guess, to some extent for the developed
parts of the world if they cannot compete effectively.
Q327 Mr Fallon: For the developed
Sir Martin Sorrell: You saw this,
for example, with a lot of Japanese manufactures. They shifted
their production away from low-cost volume manufacturing to higher-priced
niche engineering products and services that were more relevant
to mature economies. What is happening is that you have lower
cost and very efficient supply sources which are being built in
these parts of the world.
Q328 Mr Fallon: You are obviously
gloomy about the capacity of Western European policymakers to
respond to all this but are you worried about the growth of anti-protectionist
sentiment, for example, in the United States and, indeed, in China
Sir Martin Sorrell: I am more
worried about the protectionism that may be in South America,
Chavez, Kirchner, et al. I would also be worried about it in the
US and, indeed China. I am worried about that because, from a
purely selfish point of view, if you said to me: "What was
the single most important driving force for the growth and development
of WPP?" it would be free trade and the lack of protectionism.
Protectionism, in my humble view, is driven by political considerations.
As you get closer to election times, particularly national elections
candidates seem to get much more sensitive about protectionist
and populist policies and it does appeal to the electorate because
we have been singularly unable to demonstrate to working populations
that globalisation is in their interests. How do you explain to
a Detroit car worker, as he or she is put out of a job, the benefits
of globalisation? We have been unable to explain that. I think
it is a highly political issue which is a vote winner, particularly
at times of elections.
Q329 John Thurso: I was going to
ask you when will companies in emerging economies be in a position
to pose a strong competitive threat to companies in the UK creative
sector but I think you have already answered that by saying they
already are under threat.
Sir Martin Sorrell: I think they
have grown tremendously.
Q330 John Thurso: I would like to
take the question further and ask what can companies in the UK
creative industries sector do to minimise the threat and maximise
the opportunity, as you are doing?
Sir Martin Sorrell: I think by
increasingly penetrating the market. There are some very big differences.
Japan has always been a highly protected market. Dentsu has 25%
of the market, Hakuhodo has 19%, so between them they have 44%
of the market. We own 20% of the third largest agency in Japan,
Asatsu UK, we have a 20% interest. But Japan has really been fortressed.
In fact, the more successful the Japanese domestic economy is,
the more resistance to change there is. We have been before the
Japanese Fair Trade Commission twice to try to break down the
lack of transparency, for example, on media pricing in Japan.
Twice we have been told that we are right but twice we have been
told they are not prepared to do anything about it. China is a
very different situation. We have probably been very active in
China for the last 20 years, since about 1987 when WPP acquired
JWT, and we have had no major issues. There was maybe one recently
but we have managed to deal with it, I think, pretty effectively.
We have really had no issues over the 20 years and we have been
welcomed in as a JV partner and as WTO was accepted by the Chinese
and implemented by the Chinese and our JV partners suggested that
we raised our interest from a 50:50 basis in one case, the largest
case, to 75:25. I think the answer to your question is that we
have to take our 15% share and expand it as much as we can. We
have had a recent introduction of M&A protocols in China.
It was 8 August last year when the Government said that if you
have 25% share, if you have certain sales and profits of an RNB
figure which I cannot remember, any acquisition or deal that you
do there of a similar nature is subject to reference, rather like
an EU reference in the context of the Commission. That was the
sign of a little bit or protectionism, not so much in our industry
but in strategically important industries to the Chinese. I think
we have to continue to expand our business in China and India.
I am focusing a lot on that but I would include Russia and Brazil
in that, and Indonesia. We are starting to make significant investments
in Pakistan, in Vietnam. There are other markets in the world.
Latin-America is really confined to Brazil, Mexico and Argentina.
Because of the crunch in Argentina about four or five years ago,
it is much more volatile, and post the election or the re-election
of Kirchner later this year in Argentina, there may be significant
issues in Argentina again. Latin-American intention is very much
Brazil and Mexico. In Russia and the CIS countries there are big,
big opportunities. Corruption in Russia is a major issue. It is
very difficult to operate there but with the market growing at
35% from a small base for us, for example, and that being a reflection
of what our clients are doing, it is a very important market,
as is the Middle East as well, which is growing at 25%. Increased
penetration of those markets I think is very important. I would
like to make one point, Chairman. I go to China about five or
six times a year. The thing I noticed a couple of weeks ago, which
in a way is quite scary, is that Chinese multinationalsand
they do exist to a very significant degreehave a degree
of self-confidence I have not noticed before in the 10 or 15 years
I have been going there. I think they look at some of the western
companies and the lack of success of some of the western companies
and say to themselves, "Maybe some of the things we thought
we did not know are not quite as important as we thought they
were." I detect with the Indian companies a degree of self-confidence
and independence which was not there three, four, five years ago.
I think their success is driving them to be more and more confident
about their abilities. The Chinese have great virtue in listening
and learning and they adapt very rapidly. I think they have learned
a lot, they have listened a lot and they are carving their own
Q331 Mr Todd: Can we look narrowly
at Britain for a moment. Let me suggest to that, relative to other
European states, there are some encouraging signs, and then I
want to ask you about one particular aspect. We have the English
language, which is clearly a huge advantage in a globalised world.
We have networks built around historical experience an migration
patterns that are of great assistance. We have a substantially
Indian community in this country, a substantial Chinese community
in this country and well-established relationships with both major
sources of growth, and we have some very powerful historical brands
which are identifiable in a global world. The point I am coming
to is that we tend also to say we are very good at innovating.
Do you think that is true?
Sir Martin Sorrell: I think it
is all true but I come back to this sort of comparison to companies.
If you take new technology companies, companies that start with
a clean sheet of paper, in competing against companies with legacies
or legacy systems they have a spectacular advantage. Some of the
countries we have been talking about start almost with a clean
sheet of paper. We are hidebound by the legacies that we have:
pension liabilities, healthcare liabilities, whatever it is, and
there is an attitudinal problem as well. I jointly chaired the
World Economic Forum with Peter Brabeck-Letmathe, CO of one of
our major clients, Nestlé, two years ago in Davos in January
2006. At the opening session he presented some wonderful statistics
from various countries. One of the questions posed to parents
of children in each country in the analysis was: "Do you
think it is important to teach your children to work hard or that
hard work is an important thing?" In Denmark 98% of those
interviewed thought it was not important to do so. In China 98%
of parents thought it was important. These are different value
systems. You mentioned immigrant populations. I am a second generation
immigrant. My grandparents came from Eastern Europe and my parents
were born here, so I am second generation British. I think the
role of immigrant populations inside population is very important
and very significant in encouraging growth. I think it is attitudinal
and that is why I am somewhat bearish about the prospects. I am
not saying it is a bad thing. It maybe that in France a 35-hour
week is the right thing, is a good idea, and maybe we have a happier
life. Maybe we are happier than the Chinese or the Indians.
Q332 Mr Todd: Fortunately, we do
not have to make policy for the French.
Sir Martin Sorrell: No, but I
think you have to bundle it up together, because the issues we
are talking about are UK issues, French issues, Italian issues,
German issues. Interestingly, Spain is different. Our experience
of Spainand maybe it is post-Franco euphoriais different.
Economic growth in Spain has been stronger.
Q333 Mr Todd: Is there another attitudinal
problem? When we do think of something new and develop it into
a successful SME, is the temptation there just to flog it and
take your money and buy your Italian villa and fast cars rather
than grow a business which may be a more hungry economy and less
an acceptable trait?
Sir Martin Sorrell: All generalisations
are dangerousand I have made lots of generalisations this
morning. It is difficult to say that. There were wonderful examples
of entrepreneurial success in this country and the other countries
I have mentioned, but we are talking about the weight and the
tide. The scale of what we are seeing at the moment, and the scale
of globalisation, whether we call it Americanisation or
Q334 Mr Todd: Could I just sharpen
the question I asked. Your company has grown by acquisition.
Sir Martin Sorrell: I would be
very sensitive about that: organic growth as well acquisition.
Q335 Mr Todd: Indeed, but you have
grown by acquisition and partly trading on that trait which is:
"Great, now is the time for the fast cars and the big houses"
and so on. Is that something you note that there are people in
the UK who just simply say, "Well, great business I have
built but I'd rather have the lifestyle"?
Sir Martin Sorrell: No, I do not
know, if you talk to people in China they worry about the Shanghainese
they are worried about the displays of wealth and the issue in
China is the lack of philosophy, the lack of religionsomething
that is going to be counterproductive in the end. The issue you
are raising in the context of the UK and other Western European
countries is important but I think countries such as China have
to face that issue as well.
Q336 Mr Todd: Fair enough. The barrier
to entry in much of your market is now very, very low. You could
have people sitting in a backroom producing a technology which
can advertise product for people if they are clever enough to
work out the idea and sell the business model. What are we doing
to try to use that capability? Other than what I have just said,
which is that you spot these people early and you offer them big
bucks to buy what they have developed, what are we doing to make
it easier in a UK environment to innovate in that way?
Sir Martin Sorrell: There were
three areas that I mentioned in particular: education, research
and, I think, tax systems. As I was coming here this morning,
I was thinking of the sorts of things I would be focusing on if
I were you, and they are the sorts of areas. It is going to be
very difficult for the UK, in my view, to compete effectively,
and you are going to be competing against Switzerland and Israel
and Singapore, in a sense, because they have exactly the same
issues, maybe on different scales, in terms of population and
GNP but they have very similar, difficult strategic issues to
grapple with. Those are the three areas on which I would focus
in terms of growth and development.
Q337 Peter Viggers: You put the whole
of Western Europe into one category.
Sir Martin Sorrell: In one bucket.
Q338 Peter Viggers: Absolutely. Is
the highest social cost of employment on Continental Europe something
which would allow you to distinguish the United Kingdom from Continental
Sir Martin Sorrell: No. I have
to deal with TUPE legislation. TUPE legislation means that if
one of our agencies wins a massive piece of business from another
agency, it has to take on the employees of the losing agency if
they worked 100% of their time on that piece of business. The
client we win the business from is faced with this situation that
we have to employ the people who lost their piece of business
in the first place. No, I think the social costs that we have
to deal with in the UK, rightly or wronglyand it maybe,
again, from a harmony point of view, from a social point of view,
it is the right thing to dothe structural costs of change
in the UK are not dissimilar from what we find in France, Germany,
Italy or Spain. In my view, that is something that has to change
if we are going to remain competitive.
Q339 Peter Viggers: There are various
aspects to a company's operations. There is the place where its
registered office is, the place where it is listed, the place
where the ownership of the shares is held, there is the management
and then there is the actual operation work that is done by the
company. Is it important that any of these should be in the United
Kingdom? What is the United Kingdom's specific contribution? What
is the United Kingdom's added value?
Sir Martin Sorrell: We started
here as a wire basket manufacturer 21 years ago. This is where
I live, this is where the central management has historically
been located. Let me turn it around the other way: from where
do I think is the best place for us to operate? I think the UK
has a lot of attractions from a financial point of view, from
a financial services point of view, from a stock market point
of view. We happen to have not a dual listing but a listing on
the NASDAQ and London Stock Exchange. There are two elements to
our organisation which I think are important. There is a global
element. WPP looks a little bit more confusing in the annual report
than it isand there are good strategic reasons for presenting
it in a messy waybut, essentially, there are 12 businesses.
Of those 12 businesses, 11 are really headquartered in America
(10 in New York and one in San Francisco) and one is based here.
That is of the operating companies. The global organisation, even
today, given the point about Americanisation and globalisation,
is probably best headquartered in New York from an operational
point of view. The parent company: London. Operating companies:
probably in New York, given still the weight. For example, we
did a very interesting thing. One of our research businesses has
located its human resources activity in Singapore. The chief talent
officer of that businesswhich is a $2 billion business
out of $11 billion of revenue, so roughly 20% of our businessis
now located in Singapore. In terms of Asian organisation, regional
organisation, I would encourage our businesses now to look at
Beijing and Shanghai rather than Tokyo or Hong Kong or, in some
cases, even Australia: Sydney or Melbourne. I think Chinese influence
is becoming more and more important. There is another element
which is important to your point which I think is a really interesting
one. You have the global organisation and I think you have to
have, increasingly, local organisations. I think the role of a
country manager which has been devalued in multinational corporations
over the last five or 10 years will re-establish itself in a different
way. In other words, you will have sort of ambassadors at a country
level. Having influence in a country with government, education,
research is going to become increasingly important I think. As
I look at WPP, increasingly people have global brands sitting
in New York or London or Paris, or wherever it happens to be,
and then increasingly will use country managers. It will be a
matrix. They will not have much authority at a local level but
they will be there to do three things: first, to make sure we
have the best local people; secondly, that we work with the best
local companies; and, thirdly, that we do the best local acquisitions.
One other observation: it is ridiculous just to think about a
country manager for China or for Indiathat is three billion
people or 1.1 billion peopleand have a country manager
for Portugal or Switzerland. The whole thing is imbalanced in
terms of organisation and I think that is going to change. I think
you are going to have two sorts of organisation: global and local,
and the regional will get taken out over time.