Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 320 - 339)



  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 which—to the heart of your question—I 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 media—the 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 China—the BRICs as they are known, or BRICI—including Indonesia, because we think Indonesia is a very important rapidly growing market—we 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 markets—not 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 up—and to shut up for a second—I 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 countries—and I think countries and companies are very similar—what 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 in the late 1990s. In an interview in 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 controlled—and 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 market?

  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 will—the 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 constituency—and 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 this slack?

  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 Tata—who is the Henry Ford of India, I guess—is 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 it—and we see that in services also in terms of outsourcing—are 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 parts—

  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 itself?

  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 multinationals—and they do exist to a very significant degree—have 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 course now.

  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 Spain—and maybe it is post-Franco euphoria—is 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 dangerous—and 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 religion—something 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. Terrible

  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 Europe?

  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 wrongly—and it maybe, again, from a harmony point of view, from a social point of view, it is the right thing to do—the 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 is—and there are good strategic reasons for presenting it in a messy way—but, 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 business—which is a $2 billion business out of $11 billion of revenue, so roughly 20% of our business—is 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 India—that is three billion people or 1.1 billion people—and 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.

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