Interview with Martin Sorrell
(July 1999)
by David Kilburn
1. You recently visited a number of Asian countries. What
impressions did you form about how the marketing communications industries in Asian
countries have been affected by or responded to the region's various crises?
Clearly business is getting better in the region. The problem areas
remain Indonesia and, perhaps to a lesser extent, Malaysia, but there are positive signs
there too. India has always been strong, despite recession and so has Taiwan. China has
been a little more variable but pretty good. Hong Kong remains difficult - perhaps there
is a slight shift in emphasis now from Hong Kong to Shanghai although many in Hong Kong
deny this. The Philippines also has been pretty strong throughout the recession.
Singapore, South Korea and Thailand are definitely recovering. There is an interesting
shift in emphasis away from Vietnam and less enthusiasm about prospects in Myanmar.
Australia is probably the most vibrant market at the moment and is growing strongly. All
in all there has been a positive change and even Japan is starting to look a little more
confident, although the largest economy in the region is still somewhat problematic.
If you exclude WPP's 20% interest in Asatsu, this year our revenues in
China will be greater than Japan, an interesting side-line on the development of the
Chinese market. During the recession there has been a significant decrease in costs on
both the client and agency sides. This has meant in particular a reduction in expatriate
costs which I think is healthy on two counts. First because it gives a clear signal to
nationals that there will be enhanced opportunities and secondly because the cost of
expatriate labour is so high. When the economies recover, as they are starting to do now,
there will be a significant increase in profitability.
2 How have advertisers responded?
Regrettably some advertisers, particularly national ones, have cut back
their budgets quite severely. There has been a significant difference in the attitude of
multinationals regional and global companies to the crisis, however. I think that many of
the larger international companies recognise the significance of Asia Pacific in long term
planning and as a result have decided to maintain their budgets and not cut them back as
aggressively as national companies.
3 Do you think the problems are over, as far as the marketing
communications industry goes? Has there been much recovery? Is growth returning? If not,
when and where might growth return?
Growth is returning. As you can see from our figures Asia Pacific is
showing mid-single digit growth as a whole. The problems will never be over in the sense
that the business cycle will never be eradicated. The difference between the Nineties and
the Eighties is that the cycles now are not inflation led, we're all Friedmanites now, not
Keynesians. The key issue is that inflation is restrained and that corrective action is
taken rapidly by the major western economies. As a result the cycle is less volatile.
However, given its nature the industry will always face issues when recession strikes. Our
industry is a cyclical industry. The key from our point of view is making the cycle less
volatile and more comfortable.
4. How are your companies performing in Asia?
Our companies are performing very well in Asia. Ogilvy, Thompson,
Asatsu, Batey, Hill & Knowlton, Research International, Millward Brown, Enterprise IG,
Ogilvy Public Relations, Kantar Media Research, are all doing well. I would say it,
wouldn't I, but we do have the strongest business in Asia Pacific in comparison to any of
our competitors, both qualitatively and quantitatively.
5 How do you see the industry developing in Asia over the next few
years?
Despite the crisis, we have invested a quarter of a billion dollars in
the region in merger and acquisition activity. Our largest investment was in Asatsu but
other notable investments have been the merger of Ogilvy with Singleton in Australia and
in the acquisition of a minority interest in Batey. Both are going very well.
6 Has the turmoil created new opportunities for WPP - either to
start up new ventures or to acquire? What kinds of investments have you made in Asia
recently, how much have you invested recently.
As I mentioned before we have invested a substantial amount of money in
merger and acquisition activity; for example SCMR in China, Research International in
Korea and Bangkok, Singleton Advertising in Australia and Asatsu in Japan.
But we have also had remarkable success with start ups and new
ventures, for example Enterprise IG, which is the world's largest identity and branding
company, which has had significant success and major wins in the region.
Our investment in SCMR, China's leading research company, has also been
a very great success and we are very excited by AGB Italia's win of the television
audience measurement contract in the Philippines.
7 What new opportunities do you see for growing your businesses in
the region? How much might have been invested anyhow?
Clearly we have to fill out our offer beyond advertising, market
research, public relations and public affairs into more areas of specialist
communications. Our specialist communications businesses tend to be focussed more on the
western economies - particularly the United States and the United Kingdom. There are
tremendous opportunities for us in healthcare, identity and branding, sales promotion,
direct marketing and interactive in the area. OgilvyOne has done an outstanding job in
direct marketing and interactive but we need to further deepen and strengthen our offer in
the specialist communications areas generally.
8 Your partnership with Asatsu was one of 1998's key events. How is
that relationship working out? What have you achieved together so far? What are you
contributing to each other? What joint projects are on the agenda? Might you form
partnerships with other Asian companies?
I think the relationship with Asatsu is going very well. We are making
great progress with MindShare, which is where the focus of our activity is at the moment.
However, we have also examined Asatsu's network in the region, and our own, and are
looking at how we can consolidate our offers in an effective way for both clients and our
people. The Japanese economy has been under great pressure and the domestic Japanese
market has been very difficult. At the same time, Asatsu and DIK have formed Asatsu-DK.
There are tremendous opportunities both in terms of revenue generation and cost saving
with Asatsu-DK and our emphasis in the coming months must be on exploring both these
areas.
9 What are your goals in Asia?
Given the fact that by the year 2014, 65% of the world's population
will be in Asia, we clearly have to strengthen and deepen our offers in the area.
Currently Asia Pacific accounts for about 16% or 17% of our revenues if you include our
20% interest in Asatsu and our minority interest in Batey. I would like to see Asia
Pacific and Latin America at about a third of our business as opposed to the 22% or 23%
that they represent now. Most of this growth will come from Asia Pacific, so it should
move up to at least a quarter of our business in short order. No company that we work for
can afford to ignore the development potential of Asia Pacific in its entirety. The recent
difficulties in the region have only provided opportunities. |
Published in Marketing Magazine
in August 1999 |
