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Stack of Books

Cherries
oil on canvas
22 x 20 in
1981

Penny Machines
oil on canvas
23¾ x 29¾ in
1961

Stack of Books
oil on canvas
30 x 24 in
n.d.

Seven Suckers
oil on canvas
19 x 23 in
1970

Twin Jackpots
oil on canvas
30 x 46 in
1962

Ties
oil on canvas
20 x 26 in
1980

Cake Slices
oil on canvas
20 x 16 in
n.d.

After the threat of apocalypse, new centres of gravity

WPP CEO Sir Martin Sorrell reports

It’s an acronym, but one that carries more than a little truth. The expression ‘L-U-V’ was coined* to describe the way the world’s regional economies would pull out of recession, but it serves equally as a reminder of where we are going. It works like this – a flatter ‘L’ or italic ‘L’ for Western European growth, a speedier ‘U’ for the US and a sharper, more rapid ‘V’ for the BRICs nations and the Next 11 as identified by Goldman Sachs. The letters approximate the fragile recovery of 2009 – very much a year of two halves – but also the shape of things to come, as the planet’s economic tectonic plates shift into a new pattern. With apologies to John Paul Young, LUV is in the air.

Over a quarter of a century, WPP’s strength has been our ability to identify trends and capitalise on them for our clients and ourselves. It’s how we began with two people in a room all those years ago. It is how we have weathered the recent crisis. And it is how we will position WPP for sustained growth in the years ahead – albeit with nearly 100,000 people directly with us, access to over 138,000 and rather more rooms than we started with.

*By Stella Dawson of Thomson Reuters in July 2009

 

It is essential that we identify geographic, functional and technological changes and adjust our business to make the most of them. For that reason, we expect the balance of our work to move from the ‘L’ shape of Western Europe and other established, slower-growing economies towards the ‘V’ of dynamic new markets. They include China with its possibly 1.5 billion and rising population, along with India and the other BRICs nations, Brazil and Russia – not to mention the Next 11.

The process is unstoppable. Cynics can no longer argue that the inevitable power shift from West to East is just about cheap labour and low-cost manufacturing. Indeed, the old assumption that China and India will remain mere makers of cheap generic goods could prove life-threatening. Both countries are cultivating their own global brands and service industries and they will be as good as anything the West can muster. After all, we used to say the same thing about Japan or Hong Kong.

GDP projections
Source: IMF
f Forecast
Shape of global recovery
Source: IMF: GroupM
f Forecast

Fortunately, WPP has leadership or near-leadership positions in all these countries (other than Iran, one of the Next 11), a position we will maintain. In India, for instance, we have a substantial market-leading share and in Greater China a market-leading share, making the latter WPP’s fifth largest market already after the US, UK, France and Germany. That can only grow as the global financial crisis fades.

Other changes are remaking our world. Of these, the most important is the continuing expansion of those parts of our business that sit outside traditional advertising. More of our work will be in marketing services, the so-called below-the-line areas such as Consumer Insight, Public Relations & Public Affairs, Branding & Identity, Healthcare and Specialist Communications – particularly direct, interactive and internet communications. Public Relations & Public Affairs, also, can expect a prosperous future as its traditional skills – building relationships and influencing opinion-formers – are brought to bear on the new internet frontiers of blogging and social networking. These shifts in the balance of our business are inevitable as audiences fragment, the costs of television airtime continue to fluctuate, gadgets like the iPad or e-readers change media consumption habits and – most importantly – as the internet’s reach extends, promising more measurable, predictable results.

Understanding what will keep our clients awake at night in the 21st century is crucial. Overcapacity in almost all areas of manufacturing – too many cars still chasing too few customers, for example – casts a cloud over prospects, forcing discounting and a profitless prosperity on key industries. This was true before the credit crunch; it is all the more so now.

Clients are equally troubled by the dominance of global retailers and the consequent pressure on prices. Some companies rely on sales in Walmart stores for a large part of their turnover. These sales may be crucial to the company, but for Walmart the numbers may be no more than a rounding error. Understanding of distribution and retail is crucial for survival.

 

Worldwide communications services expenditure 2009f1 $m
  Advertising Market
research
Public
relations
Direct &
specialist
communications
Sponsorship Total
North America 155,797 8,582 3,589 82,437 16,790 267,195
Latin America 24,307 1,750 300 21,000 3,500 50,857
Europe 123,885 15,000 2,350 85,920 12,100 239,255
Asia Pacific 126,818 4,300 1,010 31,156 10,100 173,384
Africa, Middle East and Rest of world 13,802 1,900 15,702
World total 444,609 29,632 7,249 220,513 44,390 746,393
Worldwide comms expenditure
Source: IMF: GroupM
f Forecast
1
Estimate
Revenues cited here represent an estimated 80-90% of the worldwide market. Estimates exclude certain unmeasured trade/consumer promotional expenditures and very early stage economies.

Internal alignment is another essential as global companies react to new markets in the East and stagnant economies in the West. Getting everyone in a company facing the same way, working for the same vision, is key. As the geography changes, so will old-fashioned management structures. Regional silos can expect a shake-up and local managers, sensitive and knowledgeable about their local markets, may well come to the fore again. Consolidation also poses threats and opportunities to our clients – and is changing our industry with the rebirth of superagencies or full-service agencies and changes in the way we structure ourselves to meet companies’ needs.

Large clients are increasingly looking to parent or holding companies that draw on the strength of their individual subsidiaries to present integrated solutions to their marketing needs. We are winning such pitches. All this dictates that hiring and retaining the right talent will remain crucial for us and our clients. And here is a paradox. It is almost as if the shortage of human capital runs in inverse proportion to excess manufacturing capacity. People and skills are always crucial.

Corporate responsibility is another concern for clients – although in truth a no-brainer. Only those seeking a fast buck and subsequent oblivion would surely think otherwise. While globalisation, free trade and scientific advance, within reasonable environmental and social constraints, will still be the most efficient way of enriching the most people in the world in the fastest time, the current economic crisis underlines the importance of corporate responsibility and responsible consumption.

Where 2009 was a very, very tough year, 2010 has already seen stabilisation, if not growth, perhaps only because of the massive amounts of money – $13 trillion and counting – pumped into the system one way or another. Most of that money has come from governments, who because of this increased spending have themselves become major clients for us.

In uncertain times, branding or differentiation and innovation – essentially, what we do – are everything. The first requirement is always a brilliant idea. Then you need co-ordination. Without the first, however, the second is pointless. You can’t, after all, co-ordinate a lousy idea. So creativity and imagination win every time. There is a limit to how much you can cut costs; there is no ceiling on innovation.

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