Geography reigns

Our role in the BRICs, Next 11 and other faster-growth markets continue to be one of WPP’s core strengths and we are determined to raise their concentration from the current 30%-plus to between 40% and 45% of our revenues within five years.

While still outpacing that of mature markets, growth has slowed, and currency devaluations have had a negative impact on businesses such as ours.

Globalisation never fails to surprise and excite. Indonesia, Mexico, Colombia and Nigeria are already enticing prospects

That said, at WPP we focus on the long term. I find it slightly extraordinary that six months ago exposure to faster-growth markets was considered a virtue, and now it is fashionable to characterise it as a vice.

Regardless of short-term fluctuations in market sentiment, these territories will be a major part of everyone’s future and if I could double our business in China overnight, for example, I would do it in an instant.

Honourable mentions to…

Globalisation never fails to surprise and excite. Indonesia, Mexico, Colombia and Nigeria are already enticing prospects. Argentina and Venezuela offer interesting opportunities.

In 2013, we opened for business in Myanmar, taking us to 110 countries. In the fullness of time, we may even see opportunities in Iran, Cuba and maybe even North Korea.

Back to China

There are those who continue to see China purely in terms of inward-looking state monopolies focused on an inexhaustible home market. They believe the conditions for innovation don’t exist there, that innovation is somehow a Western preserve. Smarter minds, however, are looking East – and learning.

The notion that China is merely an imitative manufacturer has already been shown to be unfair and untrue. Much the same was once said of Hong Kong, Japan and South Korea – and their critics were equally mistaken.

The variety, scale and power of Chinese companies are revealed in Millward Brown’s latest BrandZ list of China’s top 100 brands. As these companies grow, they will seek to differentiate themselves (with the help of marketing services businesses) from Western brands both in China and worldwide. We’ll see the equivalent of Samsung, Toyota and Sony coming out of the Middle Kingdom.

Chinese tech companies are especially interesting and exciting. Some are talking about Alibaba having a market capitalisation of $150-200 billion, with Tencent at $140 billion and Baidu at $60 billion.

Baidu, which operates almost exclusively in China, processes more than five billion search requests a day, putting it on a par with Google’s global figure. Tencent’s WeChat messaging facility, launched two years ago, is used by around 400 million. Its revenues and profits are greater than Facebook’s. All this in a country where more than half the population has yet to go online.

Huge demand is driving not only volume in these businesses, but new thinking about how services are delivered in a hyper-connected world.

Given the growth in digital activity, it is no surprise that technology companies are looking at financial services. Alibaba, Tencent and Baidu are shaking up banking with their own financial transaction platforms.

Deposits to Baidu Wallet, a new wealth management service, reached their limit of one billion yuan within five hours of launch. Alibaba is almost a bank already: by July last year, it had made short-term loans totalling more than $16 billion to businesses selling merchandise on its sites.

If anyone should doubt China’s ability to generate original ideas, we need only to return to privately-owned smartphone manufacturer Xiaomi.

Lei Jun, its chief executive, is often referred to as the Steve Jobs of China – a tribute he dislikes. Xiaomi is worth $10 billion after three years (more than Nokia’s handset business when sold to Microsoft) and it has recently overtaken Apple’s market share in China.

Rather than copying Western rivals, the company is forging its own path with an open approach to product development and a business model based on ongoing services to its handset owners, such as accessories and apps. It has also launched a TV box before Apple.

If I were running a Chinese company, I would stay focused on the domestic market with its 1.3 billion consumers, until reaching saturation. But that doesn’t mean Chinese companies won’t develop the itch to expand abroad. Already some garner 20% to 30% of their sales from outside China.

While we were in China recently, Fosun, a leading Chinese conglomerate, backed a management-led bid to take Club Med private and Shuanghui, a Chinese meat company, bid for the UK’s Smithfield.

Chinese innovation, creativity and brands that want to play on the world stage are already here. Expect much more.

BrandZ Top 10 most valuable Chinese brands 2014

Rank Brand Brand value $m Year-on-year change %

Source: Millward Brown Optimor (from data compiled in September 2013)

1 China Mobile 61,399 21
2 ICBC 39,658 -2
3 Tencent 33,879 68
4 China Construction Bank 25,510 6
5 Baidu 19,986 -12
6 Agricultural Bank of China 19,318 12
7 Bank of China 13,636 0
8 PetroChina 13,433 12
9 Sinopec 13,133 5
10 China Life 12,702 -12

BrandZ Top 10 most valuable global brands 2013

Rank Brand Brand value $m Year-on-year change %

Source: Millward Brown Optimor (from data compiled in September 2013)
Note: 2014 rankings available after 21 May 2014.

1 Apple 185,071 1
2 Google 113,669 5
3 IBM 112,536 -3
4 McDonalds 90,256 -5
5 Coca-Cola 78,415 6
6 at&t 75,507 10
7 Microsoft 69,814 -9
8 Marlboro 69,383 -6
9 Visa 56,060 46
10 China Mobile 55,368 18

BrandZ Top 10 most valuable Latin American brands 2013

Rank Brand Brand value $m Year-on-year change %

Source: BrandAnalytics/Millward Brown Optimor

1 Corona 6,620 29
2 Telcel 6,577 -22
3 Skol 6,520 39
4 Petrobras 5,762 -45
5 Falabella 5,611 7
6 Bradesco 5,492 -18
7 Ecopetrol 5,137 21
8 Claro 4,454 3
9 Itaú 4,006 -39
10 Aguila 3,903 n/a

Top 20 US advertisers 2013

Advertising spend $m

2013 rank 2012 rank Advertiser 2013 2012 % change

Source: Kantar Media

1 1 Procter & Gamble 3173 2839 11.8%
2 3 General Motors 1794 1631 10.0%
3 4 AT&T 1793 1557 15.2%
4 2 Comcast 1647 1694 -2.8%
5 5 L’Oréal 1549 1462 5.9%
6 8 Toyota 1267 1238 2.4%
7 9 Berkshire Hathaway 1252 1178 6.2%
8 6 Verizon Communications 1219 1406 -13.3%
9 16 Pfizer 1138 897 26.8%
10 11 Time Warner 1130 1065 6.1%
11 12 Ford Motor Co 1124 1068 5.2%
12 10 Chrysler Group 1043 1083 -3.7%
13 20 Johnson & Johnson 1010 833 21.3%
14 13 McDonald’s 992 969 2.3%
15 Softbank 928 817 13.6%
16 Wal-Mart Stores 892 726 22.8%
17 14 Walt Disney 876 928 -5.6%
18 Nissan 870 783 11.1%
19 19 PepsiCo 860 816 5.5%
20 Yum Brands Inc 858 783 9.6%

Brand America reasserts itself

There are several reasons to be cheerful about the future of the US. Confidence is returning to the world’s largest economy and, importantly, the fundamentals are strong.

The US has unrivalled strategic, cultural and environmental strengths. It has a world-class entrepreneurial spirit and a strong immigration-based society. It has tremendous natural resources and is looking to an energy self-sufficient future through shale gas.

It also stands to benefit significantly from revolutions in manufacturing such as 3D printing, and is home to the world’s greatest centre of innovation in Silicon Valley, with innovation in sustainability also developing.

These developments in manufacturing and technology will reposition America in comparison with lower-cost offshore options. Indeed, there are indications already of clients moving manufacturing back onshore to the US, as capital becomes a more important manufacturing input and energy costs fall.

US sales of new vehicles 1983-2013

Total units, m

US sales of new vehicles 1983-2013

Chapter 7 of 13