Strategic maneuvers

When it comes to international thought leaders, you don’t get much bigger than Sir Martin Sorrell. As the Group CEO of WPP – one of the world’s largest communications services groups – over the past twenty years Sorrell has undertaken a number of strategic moves to increase the company’s global portfolio and its footprint. He began adding companies and clients in Asia as well as Europe, the Middle East and South America and creating a full-service, global-marketing company to serve worldwide clients. Today WPP derives more than half its income from marketing services rather than advertising.

So, as an international business leader, how does Sir Martin see the business environment and the emerging opportunity in the Middle East? “I think they’re very strong,” he says. “We’ve seen a shift in wealth from West to East – not only in the Middle East but in Asia-Pacific and Latin America as well – because of what’s happened to the price of oil, energy and commodities. The Middle East is a very important area for expansion for us. We already have about 2500 people in the Middle East, revenues approaching US$300 million, out of a total of US$12 billion for the company.

It’s not big in the context of the company, at about three percent, but it’s growing rapidly, at around 25 percent per annum. It can’t carry on forever going at that rate, but will certainly outdistance the US and Western Europe and the other regions of the world for the foreseeable future. As long the oil price remains high – which it is likely to do – the region is becoming more and more important in the context of our operations. We grown heavily organically there, but we’re also making acquisitions. We recently made an acquisition in Dubai in the branding and identity area. All in all, I think it’s very important and will continue to be so.”

Two of the major challenges of development in the Middle East are geographical development and technology. But a powerhouse like WPP is ready to meet those challenges. Geographically, WPP is the market leader in its industry in the Middle East. In most markets, it has a number one or two position, and is continuing to build its advertising, its media investment management businesses and then its businesses outside the traditional areas (such as information insight and consultancy, public relations and public affairs, branding and identity, healthcare communications and direct, interactive and internet). Geographically, the company is set to maintain these positions because it holds leadership positions in the market.

Technologically, the traditional media continues to grow rapidly in the region, unlike the West where the traditional media are under pressure. New media opportunities in terms of Internet, mobile and video are becoming more and more prevalent and more and more attractive, so WPP is continuing to diverge. “Mobile penetration is very high in most markets,” confirms Sorrell. “Internet penetration is growing rapidly. As broadband becomes more available video is also growing. There are strong younger age groups in these markets as well. New media is very attractive as people change their media consumption habits. And we know that in the Gulf, or in the Middle East, just like everywhere else, consumers are spending about 20 percent of their time online, so these media are becoming more and more important.”

As a way of adapting to this changing business environment, WPP has made strategic moves to acquire companies that provide platforms for these different kinds of technologies. “We get that age in our industry, the application of technology, which follows two previous waves, the big idea – developing big creative ideas to differentiate clients’ products and the consolidation of media following the growth of new technology and the pressure that traditional media will run as a result, particularly as television pricing faster than inflation. And I think we see the same trends taking place in the Middle East, and 24/7 giving us the opportunity to apply search technology, develop publishers’ websites and advertisers’ websites,” he explains.

Having acquired these diverse companies, you might think it would be difficult to cover different markets. But not for a company as audacious as WPP. “It’s not tougher,” Sorrell tells me. “Well, it’s more complex, but it’s more interesting. Clients are always looking to expand their businesses in the faster-growing geographies of the world, so we have to be there. One of those faster growing geographies is the Middle East.”

Fast growing geographies are one symptom of a world that’s becoming a more complicated place. Sorrell once called Google a ‘frienemy’, a term he explains to me. “Today, our clients have become competitors. Competitors have also become clients, but this is no different to any other industry. Look at electronics industry. You look at the automobile industry. You look at commodities. It’s true about all industries. We’re just playing catch up, really.”

So what is the outlook for global advertising in the Middle East for next year? Sorrell expects WPP to go from strength to strength. “I would expect the Middle East to have another strong year this year, primarily driven by energy prices. And I would expect to see our business continuing to grow at 25 percent next year. I’d be disappointed if that was not the case. Obviously, what happens on a world stage is important, but I’d be looking for another strong year of growth in ’08 and in ’09.” Given his track record, we’d be surprised if he achieves anything less.

Recognition and awards

• Member: FTSE100, Euro FT300, Global FT500, Forbes International 500, Business Week 1000.
• Member: Dow Jones Sustainability World Index, Dow Jones STOXX Sustainability Index, FTSE4Good Sustainability Index.
• Sir Martin Sorrell and Paul Richardson were named Best CEO and Best CFO respectively in the Media sector by Institutional Investor in 2007.
• WPP's investor relations team won Best of Sector (Media) at the IR magazine UK awards in 2007.
• WPP's 2006 Annual Report received two platinum awards from the League of American Communications Professionals, placing it in the top six of 2,500 entries worldwide. Also won the Accountancy Age award for best annual report.

WPP history
WPP was formed in 1985 when Martin Sorrell took control of a shell company, Wire & Plastic Products PLC. It made its first acquisitions in 1986, buying 10 marketing services companies by year-end. In 1987, WPP bought the J. Walter Thompson Group and, in 1989, the Ogilvy Group.

After financial restructuring in the early 1990s, WPP continued to develop its operations with the formation of CommonHealth, a healthcare communications network, in 1992. Acquisitions and operational developments continued throughout the 1990s, including the creation of Kantar, the parent company for WPP's research businesses, and combining the media operations of O&M and JWT to form MindShare.

During 2000-2002, WPP acquired Young & Rubicam Inc. and The Tempus Group, and continued to build stakes in a number of Chinese and other Asian businesses. Cordiant Communications was acquired in 2003 and Grey Global Group in 2005.

In 2007, WPP Digital was created to develop the Group's digital capabilities.