America back in the game
Past Annual Reports have featured work by artists from China, India, Africa and Latin America and, this year, Eastern Europe. Last year’s report showed work from the acclaimed US painter Wayne Thiebaud. The choice was apt, for America was at a crossroads, one not dissimilar to that which it faced in the 1980s, and the turnaround we have seen in 2010 almost looks like America bites back.
Top 20 US advertisers 2010
Ranked by total measured ad spending* $m
|2010 rank||2009 rank||Advertiser||2010||2009||% change|
|1||1||Procter & Gamble||3,123.7||2,651.7||17.8%|
|8||8||Johnson & Johnson||1,137.1||1,230.4||-7.6%|
|9||11||Ford Motor Co||1,123.4||1,013.0||10.9%|
- Source: Kantar Media
- * Measured spending in TV; magazines; newspapers; radio; outdoor.
The growth of China and India might lead some to underplay the continuing importance of the US. That would be a mistake. Failure to understand its significance remains a risky move even in these changing 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 all but 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 hurdle 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 very strong.
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. Indeed, before he died, 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 and Catalonian nationalism. Moreover, the European Union is really a supply-side led phenomenon, harmonising production and distribution, rather than demand. 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 more than half of the advertising and marketing services sector is controlled or influenced from there. If you want to build a worldwide brand you must establish a big presence in the world’s largest market – the US. At WPP, 21 of our top 50 clients are headquartered in Europe, three in Asia Pacific and 26 in the US. Almost all of the latter are located in the northeast 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. The European Union at 500 million is over one and a half times that size, but much more heterogeneous. Second, the power and size of US capital markets. Recent 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.