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This year is marked not only by crises at the former Saatchi Group but also by the tenth birthday of WPP. While the Saatchi group may be about to emerge as an entirely different being under the new name of Cordiant. a more appropriate analogy for WPP might be that of a growing child. In its first decade, the company has experienced more than some businesses will in an entire corporate lifetime. An easy birth was followed by an awkward adolescence characterised by premature growing pains. But with its recent improved performance. WPP can now claim to be on the brink of maturity.
Now that marketing services conglomerates are an established part of the landscape, it is hard to believe they are such a relatively recent phenomenon. While many agency networks existed with head offices setting financial targets, the concept of a holding company binding together disparate agencies only really came to prominence with the development of first the Saatchi Group and later WPP. According to Bruce Crawford, president of Omnicom, it was "an aggressive acquisitions policy that prompted the formation of Omnicom".
In one sense, holding companies are not very different from the agency structures they supersede, with the added benefit of retaining clients by transferring them to a different agency string, as Interpublic did with its move of some Coca-Cola brands to the Lowe Group.
All representatives of holding companies claim their aim is to maximise their own profitability by providing the best possible service to their clients. City analysts offer an unbiased view of whether holding companies represent the most effective way of being organised in the service sector.
David Forster is an analyst at Smith New Court. He believes …