Skip to main content

Globalisation or Americanisation

1Commercial life has not worked out as Professor Theodore Levitt predicted some 25 years ago in the Harvard Business Review . The world has not been globalised to the extent he forecast, where consumers around the world bought similar products, marketed in the same way everywhere. Indeed, Levitt admitted as much in an interview to celebrate the 20th anniversary of his article. He was exaggerating to make a point, he said.

Truly global products only account for around 10-15% of our worldwide revenues. In fact, consumers are probably more interesting for their differences than their similarities. Recent political developments support this – the collapse of the Soviet Union, the break-up of Yugoslavia, devolution in Scotland and Wales, and Basque nationalism. Indeed, the European Union is really a supply-side led phenomenon, harmonising production and distribution, rather than demand. On January 1, 1993, a Euro consumer was not born.

What has been going on may well not be the globalisation of world markets, but their Americanisation. Not in the sense that upsets the French or the Germans and results in the banning of Americanisms from French commercial language – an objection to the cultural imperialism of Coke, the Golden Arches or Mickey Mouse. More in the sense of the power and leadership of the US. In most industries, including our own, the US still accounts for almost half of the world market. And given the prominence of US-based multinationals, you could argue that almost two-thirds of the advertising and marketing services market is controlled or influenced from there. If you want to build a worldwide brand you have to establish a big presence in the world's largest market – the US.

At WPP, 14 of our top 40 clients are headquartered in Europe, one in Asia Pacific and 22 in the US. Almost all of the latter are located in a north-east corridor created by Boston, Chicago, Detroit, New York and Washington.

Failure to understand the importance of North America can be life-threatening. Take investment banking. A quarter century ago, SG Warburg, Morgan Grenfell, Schroders and Flemings could be counted as strong European brands. Today they have virtually disappeared. Instead, large American banks like Goldman Sachs, Morgan Stanley, Merrill Lynch, JP Morgan, Citigroup and Lehman (but no longer Bear Stearns) dominate the industry.

A few years ago, strong European talent might have expressed misgivings about working in American multinationals. Today, these businesses are more sensitively run and offer more interesting, intellectually stimulating, global opportunities and challenges. The European-based businesses that remain, such as Deutsche Bank, UBS and Credit Suisse, still face the challenge of establishing a good market position in the US.

Neither is it easy to find European-based global companies. BP and Shell certainly get it, as do Unilever and Nestlé. So does Daimler, although Jurgen Schremp's global strategy has been dismantled. Vodafone, GlaxoSmithKline, AstraZeneca, L'Oreal and Sanofi Aventis are other good examples, although doubts in some cases remain. There are not many more.

American strength is based on three factors. First, the size and power of the American market; more than 300 million people in a relatively homogeneous market. Despite the European Union being almost twice the size, it is much more heterogeneous. Second, the power and size of US capital markets. Current difficulties aside, America is still the cheapest place to go to raise debt or equity capital, although more detailed disclosure requirements are discouraging some.

Finally, because of its strength in technology, it is hard to think of many areas where it does not lead. Third-generation mobile phone technology is one, but given the prices European companies paid for the privilege, the distinction is a dubious one.

At times in history, when a country or empire seemed to have total political, social or economic hegemony, things changed and the vacuum was filled by another power. At this point, it seems that China and India will take that role, in the context of the growth of Asia Pacific. In fact, we may now be witnessing a change from Americanisation to globalisation. In Davos, at the World Economic Forum, over the last few years, the Chinese and Indians exhibited a larger degree of self-reliance and independence, perhaps even over-confidence. Both no longer seem to want to rely on handouts or support. Both economies have reached or are reaching a size and rate of growth that may be self-sustaining and certainly more independent of US influence. While decoupling has not, in our view arrived, there is, probably less coupling. Put another way, when the US sneezes the world does not catch influenza any more, just a cold.

On my most recent trips to Shanghai and Beijing in 2007, it seemed that many Chinese companies with national and overseas ambitions were becoming much more confident and less over-awed by the capabilities of Western competition. The listening and learning approach has paid off.

We will probably still rely on the strength of the US, but increasingly we will see the growth of Asian-based multinationals. Not only Japanese-based multinationals like Sony or Mitsubishi, or South Korean-based chaebols such as Samsung, LG or Hyundai (the Samsung of the car industry). But Chinese multinationals such as Lenovo, Haier, Konka, Bird, Bright Dairy, China Mobile, China Unicom and CNOOC (they will come again). Eight of the top 30 companies in the world by market capitalisation are already Chinese. Also, consider Indian multinationals such as the two Reliances, Tata, Wipro and Infosys. The latter's headcount is up from 23,000 to 80,000 in four years and continues to grow with a target of 120,000. There is no shortage of candidates. The CEO of Infosys tells me he receives 1.3 to 1.4 million applications for jobs each year.

China will increasingly become a service-based economy. In 2005, the mayor of Shanghai called for the 55 CEOs on his International Business Leaders Advisory Council to advise on how to build Shanghai into the world's leading services centre. In 2006, the focus was on innovation, last year on climate change and planting trees in Shanghai. Similarly, India will seek to be a manufacturing centre for the world and not just focused on services.

Who would have thought that Ratan Tata would buy Corus, the re-branded British Steel (the new name created by one of our Branding & Identity companies), or that the underbidder would be a Brazilian company. In addition to Tetley Tea, Tata has acquired Jaguar and Land Rover at the top end of the car industry. At the bottom end, it is launching the Nano at 100,000 rupees (£1,300) – the cheapest car in the world.

China and India: back to the future

It is difficult for those of us in the West to comprehend the scale of Asia Pacific's potential development. China is not just one country; it consists of more than 30 provinces, with so many languages and dialects that Mao Tse Tung needed an interpreter. The population may well be closer to 1.5 billion rather than 1.3 billion. The Chinese government seems to consistently underestimate its statistics, like those for GDP growth, but it is still equivalent to four or five Americas.

It is true also that currently only 150-200 million Chinese can afford the goods and services we are marketing to them. However, this is already equivalent to over half an America and this is a dynamic situation, one that will change rapidly in the coming years. Already there are almost 600 million mobile phone subscribers in China, almost 400 million of which subscribe to one company, China Mobile (one of the top five most valuable world brands) – equivalent to one-third more than the total population of the US.

Furthermore, India, itself equivalent to three to four Americas, seems to have been stimulated into more rapid growth, driven perhaps by neighbourhood envy and the Chinese model of state-directed capitalism – although India bills itself as the world's fastest-growing democracy.

Do not underestimate the potential of the region as rapprochement spreads even to cricket, with the Indian-Pakistani test, one-day and Twenty20 series representing as important a political, economic and social signal as the Beijing Olympics. More than 1.4 billion people watched the Twenty20 series final alone. Equally, look at the dogfight for Hutchison Essar, which Vodafone won in a market growing by more than five million subscribers per month, just like China.

Asia Pacific will dominate again, proving that this really is back to the future. In 1820, China and India generated around 49% of worldwide GDP. But by the early 19th century, Meissen and Wedgwood were dismantling the high-quality, high-price Chinese porcelain industry, with similar quality but low-priced porcelain. It is the exact reverse today. China and India are forecast to be headed for the same share of world GDP in 2025 as they had in the 18th century, having bottomed out at 8% in 1973.

Currently, China and India represent over one-third of the world's population. Asia Pacific represents one-half. By 2014, Asia Pacific will account for more than two-thirds. WPP already has a strong position in the region. Greater China is already WPP's fourth largest market and we have a 15% share in mainland China – a market-leading, six-to-one advantage over the next largest competitor. In India, our market share is almost 50%, with a 25% share in South Korea. In Japan, it is almost 10%, behind the dominating Dentsu and Hakuhodo DY Group.

China's development has been rapid and will continue, but not without bumps. The government is conscious of overheating and an imbalance in rates of development between the coast and the hinterland. There has already been a very soft slowdown in growth, presenting more opportunity for investment, especially in 2008.

No multinational company bent on expanding into China or national company seeking to grow inside or outside China will miss out on the branding opportunity presented by the Olympics in Beijing. The Chinese government is already committed to $45 billion of investment around the Games, in contrast to London's $10 billion for 2012. 2008 should be a unique event and it will not end there. The Municipality of Shanghai will be investing $3 billion in Expo 2010 and there will be the Asian Games, in Guangzhou, again in 2010. 2009 offers an opportunity to slow slightly and consolidate more than 20 years of growth, before preparing to surge again in 2010.

Watch out for increasingly subtle Chinese military and economic influence. Take the recent economic contact with Fidel Castro in Cuba to counterbalance Taiwanese tensions. Or Chinese investment in Galileo's GPS systems, which drew a coruscating response from the Pentagon. Equally, Beijing will not be prepared to rely on America to defend its vital and growing energy supply interests in the Middle East and Russia. It is busily building trade bridges throughout the oil- and energy-producing areas of the world, particularly Latin America and Africa.

Beijing is also changing the political dynamics of Africa, in particular, with more than 800,000 Chinese in Africa participating in projects. Increasingly, Africa is the continent of opportunity, rather than the continent of war, disease and poverty. President Gaddafi's volte face in Libya has energised North Africa and Egypt, and China's focus has drawn the attention of Western governments seeking to curry favour, too.

The other challenge to American dominance may well come from the Muslim world. Already, Muslims number 1.6 billion people, around 19% of the world's population. By 2020, they will account for 2.1 billion or 30% of the projected world's population. The recent struggles in Afghanistan and Iraq, and possible action against Iran, really only continue the conflicts of the 1950s in Suez, the oil price increases of the 1970s and the invasion of Kuwait in the 1990s. Westerners have made little attempt to understand the Islamic mind and assume wrongly that Muslims share their value systems. They are different and it will be increasingly necessary to make a serious and sincere attempt to understand them.

These events may demand new thinking from the world's multinational companies. As US-centric companies, for example, seek to develop their businesses and extend their reach into more heterogeneous markets, it may well be that the balance of organisations will shift. There will continue to be a focus on global, max or core brands, with sales of more than $1 billion, particularly to counterbalance the power of global retailers and as companies become less dependent on the US markets. Coca-Cola's geographic coverage of a quarter in North America, a quarter in Latin America, a quarter in Europe and a quarter in Asia Pacific will become more the norm, rather than Pepsi-Cola's 56% in the US.

BrandZ™ Top 100 Most Powerful Brands 2007
Top 20 global brands by value $m

Brand Brand
% chg
vs. 07
% chg
vs. 06
1 = Google 86,057 66,434 37,445 30% 77%
2 = GE 71,379 61,880 55,834 15% 11%
3 = Microsoft 70,887 54,951 62,039 29% -11%
4 = Coca-Cola 58,208 49,612 41,406 17% 20%
5 = China Mobile 57,225 41,214 39,168 39% 5%
6 +3 IBM 55,335 33,572 36,084 65% -7%
7 +10 Apple 55,206 24,728 15,976 123% 55%
8 +3 McDonald's 49,499 33,138 28,985 49% 14%
9 +3 Nokia 43,975 31,670 26,538 39% 19%
10 -4 Marlboro 37,324 39,166 38,510 -5% 2%
11 +12 Vodafone 36,962 21,107 24,072 75% -12%
12 -2 Toyota 35,134 33,427 30,201 5% 11%
13 -6 Wal-Mart 34,547 36,880 37,567 -6% -2%
14 -1 Bank of America 33,092 28,767 28,155 15% 2%
15 -7 Citi 30,318 33,706 31,028 -10% 9%
16 = HP 29,278 24,987 19,732 17% 27%
17 -2 BMW 28,015 25,751 23,820 9% 8%
18 +15 ICBC 28,004 16,460 N/A 70% N/A
19 +2 Louis Vuitton 25,739 22,686 19,479 13% 16%
20 = American Express 24,816 23,113 18,780 7% 23%

Source: Millward Brown Optimor
* Coca-Cola's increase is due to a change in methodology to include its bottlers
* IBM's business value increased by 30% and share price has increased 40%
* Apple's business value increased by 124%
* Vodafone's business value increased by 24%, and brand contribution increased by 4 percentage points

Top 20 global marketers 2006
Ranked by total worldwide measured ad spending*

Rank Worldwide
advertising spend $m
  US measured
media spending $m
  Spend by region in 2006 $m
2006 2005 Advertiser Headquarters 2006 2005 %
  2006 2005  %
  Asia  Europe  Latin
1 1 Procter & Gamble Co. Cincinnati 8,522 8,184 4.1   3,527 3,395 3.9   1,774 2,671 235
2 2 Unilever London/Rotterdam 4,537 4,197 8.1   848 763 11.1   1,309 1,906 329
3 3 General Motors Corp. Detroit 3,353 4,059 -17.4   2,208 2,918 -24.3   56 839 94
4 5 L'Oreal Clichy, France 3,119 2,768 12.7   753 798 -5.6   277 1,910 68
5 4 Toyota Motor Corp. Toyota City, Japan 3,098 2,840 9.1   1,203 1,075 11.9   1,172 574 38
6 6 Ford Motor Co. Dearborn, US 2,869 2,643 8.5   1,701 1,567 8.6   126 850 74
7 7 Time Warner New York 2,136 2,477 -13.8   1,838 2,076 -11.5   80 184 2
8 10 Nestlé Vevey, Switzerland 2,114 2,109 0.2   605 585 3.4   276 1,075 104
9 8 Johnson & Johnson New Brunswick, US 2,025 2,334 -13.2   1,351 1,675 -19.3   227 340 36
10 9 DaimlerChrysler** Auburn Hills, US/Stuttgart, Germany 2,003 2,118 -5.4   1,425 1,592 -10.5   32 449 29
11 11 Honda Motor Co. Tokyo 1,910 1,833 4.2   878 855 2.7   833 110 13
12 14 Coca-Cola Co. Atlanta 1,893 1,754 7.9   487 476 2.3   444 746 132
13 12 Walt Disney Co. Burbank, US 1,755 1,823 -3.7   1,438 1,421 1.2   89 187 0
14 17 GlaxoSmithKline Brentford, UK 1,754 1,606 9.3   1,295 1,192 8.6   102 281 42
15 13 Nissan Motor Co. Tokyo 1,670 1,780 -6.2   944 1,024 -7.8   455 187 22
16 19 Sony Corp. Tokyo 1,620 1,537 5.4   1,117 1,009 10.7   97 317 2
17 18 McDonald's Corp. Oak Brook, US 1,611 1,554 3.7   785 762 3.0   301 431 33
18 16 Volkswagen Wolfsburg, Germany 1,609 1,610 -0.1   302 425 -28.9   38 1,171 55
19 21 Reckitt Benckiser Slough, Berkshire, UK 1,550 1,446 7.2   286 288 -0.7   152 1,023 34
20 15 PepsiCo Purchase, NY 1,530 1,670 -8.4   966 1,125 -14.1   180 218 82

Source: Advertising Age
* From Nielsen, TNS, Ibope, PARC, Steadman, Sigma and others
** For combined DaimlerChrysler. Company sold Chrysler in August 2007

The largest companies in the world at end of 2007
From the FT Global 100

  Fund Country Market
March 2008
1 PetroChina China 724 1
2 Exxon Mobil US 512 2
3 General Electric US 375 3
4 China Mobile Hong Kong 354 5
5 Indi & Coml Bank of China China 339 7
6 Microsoft US 333 6
7 Gazprom Russia 330 4
8 Royal Dutch Shell UK 270 9
9 AT&T US 252 10
10 Sinopec China 250 30
11 Petrobras Brazil 242 8
12 BP UK 232 12
13 Procter & Gamble US 228 11
14 Berkshire Hathway US 219 14
15 EDF France 217 22
16 China Life Insurance China 204 44
17 China Construction Bank China 203 24
18 Total France 199 20
19 Vodafone Group UK 199 25
20 HSBC UK 198 17
21 Bank of China China 198 28
22 Chevron US 197 19
23 Toyota Motor Japan 195 16
24 Johnson & Johnson US 191 21
25 Wal-Mart Stores US 190 13
26 BHP Billiton Australia/UK 186 18
27 Bank of America US 183 23
28 Nestlé Switzerland 181 15
29 Apple US 173 50
30 China Shenhua Energy China 168 37

Source: Financial Times, Analysis: 'Chinese Champions', 17 March 2008

Worlds 10 biggest economies

Sources: IMF 2007, World Bank
*Market exchange rate
†Purchasing-power parity (PPP) assumes exchange rates which value currencies at rates such that each currency will buy an equal basket of goods.