Sorrell teaches propaganda to the communists
WPP will generate US$350 million in China this year, chief executive says
The view of willow-fringed lakes from the sun-dappled lawn of Beijing's Diaoyutai state guest house on a fine spring morning should be enough to relax even the most harassed business executive. But Sir Martin Sorrell, chief executive of WPP Group, the world's second-largest advertising and marketing conglomerate, is not unwinding, even for a moment.
Glancing around constantly and fiddling with his Blackberry, Sir Martin seems impatient and easily distracted. But asked about his company's business in China, he immediately zeroes in.
'In China, we see rapid expansion of a massive market in a very short time frame,' he said. 'China is our fifth-largest market already and it's our fastest-growing.'
This year, WPP would generate revenues of about US$350 million from its businesses in China, Sir Martin said. That is only a small proportion of the US$10 billion in revenues he expects the group to make worldwide but Sir Martin forecasts growth of 20 per cent or more a year from China for the next five to 10 years - well in excess of growth in America or Europe, despite the recovery of technology advertising in those markets.
Sir Martin has brought WPP a long way since 1985, when he bought out an obscure British manufacturer of supermarket shopping baskets called Wire and Plastic Products with borrowed money. Twenty years on, after a breath-taking series of acquisitions, WPP is a global giant with 84,000 employees in more than 100 countries. That makes Sir Martin, a compact 60-year-old former finance director who has never worked on the creative side of the advertising industry, one of the most influential executives in the media today.
With a clutch of competing subsidiaries, including the J. Walter Thompson, Ogilvy & Mather and Young and Rubicam advertising agencies, and the Hill & Knowlton and Burson Marsteller public relations firms, WPP boasts some of the biggest global clients in the business, including HSBC, Samsung and consumer goods company Unilever.
Until now, multinationals such as these have generated the bulk of WPP's revenues in China as they seek to promote their products to the country's 150 million middle-income consumers. But WPP's business mix in the country is changing fast.
Earlier this month, Ogilvy & Mather landed the global advertising account for Chinese computer-maker Lenovo, estimated at more than US$100 million this year alone, and in the future, Sir Martin expects to earn far more from promoting Chinese firms' own brands both at home and abroad.
Sir Martin argues that the marketing techniques of Chinese companies are evolving at a massively accelerated pace in response to fierce competition as multinationals enter their home market.
'Chinese companies listen and learn,' he said. 'They are extremely adaptable.'
That adaptability will prove to be an enormous advantage as Chinese companies enter world markets and come into competition with companies that enjoy an olygopolistic position in their own relatively closed home markets, Sir Martin believes.
'Chinese-based multinationals will be a far more potent force than Korea's chaebols or Japanese [multinational corporations],' he said.
As Chinese firms become more sophisticated, so is their advertising. From simply shouting a product name at customers, advertisers are quickly developing brand images based on more subtle themes, with food companies claiming health benefits or consumer goods manufacturers proclaiming their environmental credentials.
'Westerners tend to be a bit snotty about advertising but the creative work being done in China is very good and very strong,' Sir Martin said. 'You could be watching this work in Chicago.'
These changes are not confined to just the wealthy coastal cities. They were happening nationwide, Sir Martin said, who hopes to open offices in three new Chinese cities this year.
Sir Martin also plans to ramp up WPP's market research businesses in China, as well as its direct marketing and targeted advertising over the internet, which he expects to overtake its mass-advertising business.
Alongside a joint venture with audience research company ACNielsen, WPP recently signed a deal allowing it to conduct market research among the 70 million members of the Communist Youth League. Earlier this year, Ogilvy & Mather set up a programme with Beijing's Tsinghua University to instruct government officials in 'public branding'.
It is hard to believe a foreign business executive could be bold enough to attempt to teach the Chinese Communist Party anything about the power of propaganda, but Sir Martin is certainly prepared to give it a try.