By RANI SINGH
The CEO of the world’s biggest advertising company explains why India, along with the other BRIC countries, is front and centre of his expansion plans.
Sir Martin Sorrell founded WPP, the world’s largest advertising and marketing services group, in 1985 and has been chief executive ever since WPP has billings of $71.7 billion and revenues of $16.1 billion. Through its operating companies the group provides advertising, media investment management, consumer insight, public relations and public affairs, branding and identity, healthcare communications, direct, digital, promotion and relationship marketing, and specialist communications. The company employs over 158,000 people (including associates) in 2,500 offices in 108 countries. Its clients include 344 of the Fortune Global 500, 63 of the NASDAQ 100 and 33 of the Fortune 50. Sir Martin advises Harvard, IESE, the London Business School, and the Indian School of Business.
Q. What is India’s contribution to WPP revenues right now?
MS: We are continuing to develop considerable business in India. We have about $500 million revenue there this year out of a total of about $17 billion worldwide, with a considerable market share. The one area where we are being extremely aggressive is in digital; direct and interactive. We have three big mobile networks in India: Vodafone, Airtel, and Reliance. Each network has over a 100 million consumers, and there are probably now about 850 million mobile subscribers in India. Clearly India is one of those markets where, in theory at least, mobile should become a major opportunity.
With the growth of smart phones we see mobile advance operations, and mobile search operations, as being of paramount importance.
Q. What do you think of the opinion of some commentators that India is about to drop out of BRIC?
MS: It’s nonsense. While most people have become a little gloomier about India’s prospects, we’d give our eye-teeth to be growing at four or five per cent. You can’t carry on at double-digit growth.
When the Indian economy grows at four or five per cent, we grow at double that. For the first six months of this year, we grew at nine to ten per cent, despite the slowdown in GDP. In China, where GDP growth is around seven and a half per cent, we’re growing at about fourteen per cent. In Russia and Brazil you see the same phenomenon. There is a strange statistical relationship. I can’t give you the reason why, but it seems that in countries in earlier stage economic growth, going through the take off stage and beyond, we see growth in advertising and marketing services about double the GDP growth rate. We’re certainly seeing that in India.
Q. How does WPP view India?
MS: Our businesses are very strong there. The challenge is to maintain our position in a growing market.
We still think that India is under-branded and under-advertised. National Indian companies such as Tata, R car industry, the steel industry, consumer appliances, food and drink, and airlines eliance, Airtel, and Hero, are becoming much more global in their approach.
We’re more focused on the multinationals in India, and the future multinationals that India is producing; in the car industry, the steel industry, consumer appliances, food and drink, and airlines (a big challenge at the moment). These industries are becoming more important in a worldwide context.
All our other areas exhibit the same strength. Our advertising is extremely strong. Our market research business has always been strong because India –it goes back to David Ogilvy’s days- has always been the heart of consumer growth, consumer insight and consumer focus.
[Companies involved in] public relations and public affairs, such as Burson-Marsteller, Cohn & Wolfe, and Hill + Knowlton, have all grown well, albeit on a smaller scale. I have always thought that India’s positioning, as the world’s fastest-growing democracy, is a very powerful one.
Q: What do you mean by under-branded and under-advertised?
MS: You see it particularly in faster-growing markets. You get the growth of multinational companies coming into the country, and then you get the growth of local companies starting to develop their brands on a local, regional and global basis.
Historically what tends to happen is that local companies in particular tend to be a little more restrained, one might even say cynical, about the value of branding, and the ability to develop a premium position, for a product which enables you to charge high prices; and to charge a premium for the value that is created. India is going through that process. If you look at advertising as a proportion of GNP, it is lower than you see in the more mature markets in the United States or Western Europe. So this is a sort of inevitable process and an attempt to explain why, if GDP is growing at five, we are growing at nine or ten.
Q: What is your solution to the problem?
MS: Educating companies about the value of branding! We do a global survey of brands and valuing brands, and I’m sure we’ll reach the top 50 in India. Increasingly what you see is Chinese, Indian, South American and Russian brands becoming players, not just on a country or regional basis, but on a worldwide basis. This will inevitably increase the proportion of GNP that’s spent on advertising and marketing services.
Q. What hurdles do you face in your Indian expansion?
MS: Obviously what’s been happening *. Infrastructure is an issue. People talk about irregularities of the BRIC markets creating difficulties, but there are also irregularities in mature markets in the West, [for example] fixing LIBOR rates and similarly reprehensible activities. So you have to be careful. People in glass houses…
China’s strength is infrastructure; some people say they’ve done too much. India’s weakness is too little infrastructure, [and it] needs to develop its infrastructure in a more sophisticated way. Given the growth of the Indian economy, roads, railways and airports become more and more important.
Q. Do you have a scale of preference for individual BRIC members?
MS: You can’t choose between them; you have to do all of them. If the UK is flat, and the US relatively flat, and Western Europe, with the exception of Germany, Italy and Spain, [also] relatively flat, and you’re trying to build a multinational company, you have no choice. My advice is: don’t choose between them; do all of them. And that applies to the next 11, or if you exclude Iran, the next 10.
Q. How does India figure in your strategic plans?
MS: India is front and centre. Our strategy is new markets, new media, and consumer insight. What we call horizontality, which is getting people to work together in the new markets.
Q. What would you like to see happen in India?
MS: My wish would be political stability and political strength, enabling the country to continue to grow at rates that we’ve become accustomed to. We’re going through one of those cyclical periods, partly driven by what’s going on in the West now, and what happened in the West in 2008. A return to strong government, placing a lot of emphasis on foreign direct investment and export growth, is critically important.
