The US: not out just yet
None of this, however, should downplay the continuing importance of the US. Failure to understand the significance of North America remains a risky move even in these troubling times. 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. Despite recent catastrophes, large American banks, such as Goldman Sachs, Morgan Stanley, Bank of America, JP Morgan Chase and Citigroup (but no longer Bear Stearns and Lehman Brothers), dominate the industry, although boutiques focusing on investment banking relationships, rather than trading, may become fashionable again.
A few years ago, strong European talent might have expressed misgivings about working in American multinationals. Today, these businesses are more sensitively run and still 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 influence is still ubiquitous. The world has not been globalised in the way the late Professor Theodore Levitt 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, saying he was exaggerating to make a point.
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. Moreover, 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 sector 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, 18 of our top 50 clients are headquartered in Europe, three in Asia Pacific, one in Latin America and 28 in the US. Almost all of the latter are located in the north-east quadrant created by Chicago, Detroit, New York and Washington.
That 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 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 phones are one, but given the prices European companies paid for the privilege, the distinction is dubious.
BrandZ™ Top 20 risers 2009
Year-on-year brand value growth
|China Merchant’s Bank||168%||-13%|
- Source: Millward Brown Optimor
- Brand contribution increases for Chivas and Johnnie Walker are a result of greater BrandZ coverage in Asia, where consumers are strongly bonded with these brands.
Top 20 US advertisers 2008
Ranked by total measured ad spending* $m
|1||1||Procter & Gamble||3,131||3,384||-7.5%|
|6||7||Johnson & Johnson||1,315||1,328||-1.0%|
- Source: TNS Media Intelligence
- Measured spending in TV; magazines; newspapers; radio; outdoor.
BrandZ™ Top 100 Most Powerful Brands 2009
Top 20 global brands by value $m
- Source: Millward Brown Optimor
- The brand value of Coca-Cola includes Diets, Lites and Zero.