Longer term looks favourable
In the long term, the outlook for the communications services industry appears favourable.
The shift in economic power to the East, South and South-East, overcapacity of production in most sectors and the shortage of human capital, the developments in new technologies and media, the growth in importance of internal communications, the rise of proximity retailing and e-commerce, the rise of procurement and finance, the focus on central and local organisation, the growth in government spending, further consolidation amongst clients, media owners and competitors, and the new focus on corporate sustainability issues such as climate change, underpin the need for our clients to continue to differentiate their products and services both tangibly and intangibly.
Moreover, the continuing growth of the BRICs, Next 11 and other faster-growing geographical markets will add significant opportunities in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe – along with the growth of ‘new-BRICs’ such as Vietnam, Pakistan, Indonesia, Bangladesh, Nigeria, Colombia, Turkey and Mexico and even Myanmar. Advertising and marketing services expenditure as a proportion of GDP has started to resume its growth, although in these relatively low-inflationary times, where our clients have limited pricing power, we remain committed to working with our clients and their finance and procurement departments to improve the effectiveness and efficiency of their investments and spending.
Given these short- and long-term trends, your Company believes it has the correct strategic priorities – new markets, new media, Data Investment Management and ‘horizontality’ – and a focus on not only strategic planning, creative execution and distribution, but also on both the application of new technology and analysis of data, to the benefit of our clients and people.
Including associates, the Group currently employs almost 175,000 full-time people (up from over 165,000 the previous year) in over 3,000 offices in 110 countries. It services 351 of the Fortune Global 500 companies, all 30 of the Dow Jones 30, 69 of the NASDAQ 100, 31 of the Fortune e-50, and some 770 national or multinational clients in three or more disciplines. Almost 490 clients are served in four disciplines and these clients account for 57.5% of Group revenues. The Group also works with nearly 400 clients in six or more countries.
These statistics reflect the increasing opportunities for ‘horizontality’ – developing client relationships between activities nationally, internationally and by function. We estimate that well over a third of new assignments in the year were generated through the joint development of opportunities by two or more Group companies.
‘Horizontality’ is clearly becoming an increasingly important part of client strategies, particularly as they continue to invest in brand in slower-growth markets, and both capacity and brand in faster-growth markets.
The Group continues to improve co-operation and coordination among its operating companies in order to add value to our clients’ businesses and our people’s careers, an objective which has been specifically built into short-term incentive plans. We may, in addition, decide that a significant proportion of operating company incentive pools are funded and allocated on the basis of Group-wide performance over the coming years. ‘Horizontality’ has been accelerated through the appointment of 41 Global Client Leaders for our major clients, accounting for over one-third of total revenues of $17.3 billion, and 15 Sub-Regional and Country Managers in a growing number of ‘test’ markets and sub-regions amounting to nearly 50 countries. The Group continues to lead the industry in coordination investment geographically and functionally through parent company initiatives and winning Group pitches. For example, the Group has been very, very successful in the recent wave of consolidation in the pharmaceutical and shopper-marketing industries and the resulting ‘Team’ opportunities.
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