Sorrell Sees Procurement Influence Ebbing

WPP CEO Martin Sorrell believes that the finance and procurement departments at marketers wield too much clout. But that will change as more companies realize they can’t “cost-cut their way to growth.”

Writing on his LinkedIn “Influencer” blog, Monday Sorrell wrote that the procurement trend was fueled to greater heights by the 2008 financial crisis and resulting recession. Many corporations “still bear the mental scars of the crash and conservatism rules,” he said.

But Sorrell believes that procurement’s clout is a short-term phenomenon. “There’s a limit to how much you can cut, but top-line growth (driven by investment marketing) is infinite, at least unil you reach 100% market share.”

Also likely to decline is the influence that big-box retailers like Walmart have over manufacturers, Sorrell said. While that won’t change overnight, “manufacturers can now have direct relationships with consumers via the Web and e-commerce platforms.” He cites both Amazon and China’s Alibaba as examples.

The WPP chief also sees consolidation continuing “despite the failure of one or two recent high-profile mega-mergers.” And he sees accelerated M&A activity continuing in many sectors, including among marketers, media owners and marketing services agencies. Among the last, he noted that “IPG and Havas [are] the subject of constant takeover rumors.” So far this year, he added, WPP has acquired 31 small- and mid-sized firms.

Sorrell also wrote that he believes economic, political and social power is shifting away from the West and toward Asia, Latin America and Central and Eastern Europe. “Although growth rates in these markets have slowed, the underlying trends persist as economic development lifts countless millions into lives of greater prosperity, aspiration and consumption.”

The full blog post can be found here.

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