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Sorrell Looks East and West

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NEW YORK What keeps Martin Sorrell awake at night?

By his own account, "China and the Internet." That's what the WPP Group CEO revealed during his keynote address this morning to attendees at the Media Convergence Forum here.

Sorrell's speech, titled "A Global Revolution," outlined what he considers the seven challenges facing multinational businesses against the backdrop of an ever-changing media landscape and the rise of China.

The first challenge is the current shift in economic power from West to East, according to Sorrell, which doesn't necessarily suggest a decline of the West, he said, but "a balancing of the world economy."

Overcapacity in the production of goods and services (e.g., the car industry) is pandemic in many businesses and further complicated by what Sorrell said was an "under" capacity of human capital.

As an example, he cited the price slashing of cars to get rid of inventory—a form of "profitless prosperity" that needs to be properly addressed.

The Web is a third challenge that Sorrell believes continues to siphon top-line talent from other industries. "The era of apprenticeship in large corporations is over," Sorrell declared.

Distribution of goods and services is a challenge that retailers such as Wal-Mart and Tesco seem to be meeting quite well, Sorrell said, noting that more Americans go to a Wal-Mart on a weekly basis than attend church on Sundays. "It's the new religion," he cracked about the U.S.-based retailer.

Referring to the recent advertising review Wal-Mart conducted for its $570 million global account, Sorrell said the client's choice of Interpublic Group's DraftFCB and Aegis Group's Carat underscores the importance of consumer data and media strategy. (WPP's Ogilvy & Mather was a finalist in that contest.)

For companies that have a long-term marketing plan, corporate social responsibility is crucial to their branding and identity—the latter being the most important task for any company to get right, Sorrell said.

As for China, Sorrell said, "I'm sure there are four or five engineering students in some garage in Shanghai that are coming up with the next Google."

Calling WPP one of Google's largest customers in terms of media buys (about $150 million), Sorrell said that for a long time he couldn't decide whether the Web search engine was a "friend or foe." Eventually, he said, WPP decided Google was a "frien-emy" whose $150 billion market capitalization was 10 times that of WPP.

Geographically, he said it was becoming increasingly clear that the global economy was operating on two tracks (China and the U.S.), with "poor old Western Europe" cast as a "mature company" that has no top or bottom line growth and lots of issues regarding an aging population and healthcare.

In 5-10 years, Sorrell said he envisions WPP's business interests becoming more Asian, African and Latin American. By 2014, the BRIC countries (Brazil, Russia, India and China) would comprise nearly 40 percent of WPP's business.

The forum at Manhattan's Le Parker Meridien Hotel continues through today. It is sponsored by The Economist magazine and WPP's G2 agency.