Bob McDonald   CEO, the Procter and Gamble Company

Opening

Procter and Gamble is the largest consumer goods company in the world and we have been operating in China over 20 years. In that time, we have built a productions plant, distribution office and technical center in Beijing, and we feel that we have become an integral part of this city. We have proudly witnessed the remarkable developments and achievements of this city, especially its successful hosting of the Olympic Games in 2008. 

There is no doubt that Beijing is continuing to develop and prosper, by leveraging the heritage of the Olympics, by optimizing the city’s industrial structure and by establishing itself as a center for technology innovation.  

As a representative from the business community, I am here today to contribute constructively to your endeavors to take Beijing to the next level of its development, whereby it is acknowledged as a true “world city”. The areas I would like to focus are those related to the promotion of consumption, innovation particularly adapted for products and the services sectors, and thirdly the marshalling of marketing skills for the promotion of a city’s international brand and image.
Towards a Balanced and Sustainable Economy for Greater Consumption
For China as a whole, the central government has a key plank of its economic policy the stimulation of the country’s consumption and for a shift to services. Beijing can leverage its role as a political and cultural center to lead this transition.

Procter and Gamble operates in many markets in the world, from large metropolitan cities to small rural villages. One of our observations is that in successful cities, especially those that are perceived as world class cities - tier one international cities - like New York, London, Tokyo etc, consumption and innovative related industries are key drivers of economic growth.  The contribution of consumption to these cities’ GRP (Gross Regional Product) is generally around 70%, whereas we learnt that the figure for Beijing is about 45% for 2009  . Typically these cities are also recognized hubs of excellence for the services and support industries promoting consumption. 

But maintaining balance is important. Beijing has wisely retained a reasonable level of light manufacturing around the city environs, of which consumer goods manufacture takes an important share. Consumer goods manufacture provides well paid jobs and effectively meets the growing demands of consumers. Household goods also have inelastic demand and are less volatile. These factories can act as stabilizers in economic downturns, as was demonstrated during the financial crisis of 2008. A buoyant consumer goods sector fosters the growth of ancillary light industries and marketing services such as printing, publishing, advertising, media, packaging and logistics.

An important legacy of the 2008 Olympics is the logistics infrastructure that was much enhanced during the period. We believe that Beijing government can nurture and adapt this logistics system to the specific needs of an economy where consumption is making a greater contribution. Beijing can position itself as a logistics hub for neighboring provinces and beyond. We commend the Beijing government’s efforts for revitalizing the logistics sectors, including consolidation, multi modal systems and the recent introduction of a logistics information system.
With all the solid base of such logistics infrastructure in place, we believe that the next step is to use it more efficiently. There are opportunities for the city in this regard in the coming years. The ratio of the cost of logistics within GDP is a major international benchmark for efficiency. In China, the figure is high at 18 percent , whereas for Western countries, the figure is typically around 10 percent. 

One way of doing that, in my opinion, is the introduction and growth of logistic information exchange and brokerage services for transportation vehicles, which would further increase utilization of resources, achieve greater efficiency and lower costs for customers and prices for consumers. Efficiencies also extend to energy conservation and pollution reduction.
Detailed Understanding of Service Receivers and Improving Quality of Service
Aside from driving consumption, building a world class city is about, fundamentally, how to meet the growing needs of its people and enhancing the quality of life for citizens and visitors. Consumers, customers and citizens are the same people.

A systematic marketing approach can be used for developing policies and measures to retain talented people to live and work in Beijing; to improve the quality of life of residents and attract greater numbers to visit and consume in the city. It is worthwhile that Beijing government consistently invests in researching its people, their ebb and flow into the city, allowing it to tailor services and develop plans to meet the expectations and aspirations of citizens and visitors. Currently, Beijing has over 17 million permanent residents, plus a significant number of visitors each year. The sheer size, diversity and mobility of these people make it a challenge for thorough analysis.

To a city government, customers include not only citizens and visitors, but also companies. In the context of building a favorable investment environment, it is equally important for the city to understand the needs and wishes of those doing business in the city, and their role in driving economic growth of the city. Improving efficiency and coordination between different government organizations and local governments are always welcome to business. Relocations of businesses across districts are still challenging at times; similarly, freer selection of local partners and suppliers would create more room for business growth. The complex and increasing needs by companies for a favorable investment environment pose considerable challenges to city government.

Over years, P&G has accumulated rich experience and developed useful methodologies of consumer understanding. We try to understand decision factors underpinning consumers’ motivations, wishes and personalities. We also try to understand them from a broader social context: what are their jobs, their roles within families, lifestyles and subsequently decide how we can design our products to help improve their daily lives. These methodologies are also applied to our business partners, whether they are our suppliers, vendors, or our customers or retailers.

P&G however would like to share our experience and knowledge of consumer and customer understanding with the Beijing government, and will be very happy if we could be of any help to your efforts in this respect.

Innovation for a Changing City

We strongly support the government in its endeavors to augment Beijing’s capacity for innovation.  Likewise, P&G continually strengthens its innovation capability and pipeline by investing two times more, on average, than our major competitors.   

At P&G we define innovation broadly, making it holistic and open.  P&G’s 172 years of success has been founded upon innovation of everyday products, their marketing, and supporting processes. For us innovation is interwoven into our every work day, and happens throughout our business operations.

Importantly innovation efforts should not be restricted to within the organization only. By our “Connect plus Develop” model, we are very open to cooperating with technology partners. P&G believes that open connections with external partners, including research institutions, suppliers, clients, individuals and even competitors, is a sustainable source of competitive advantage. Our China R&D center, as an example, has worked over a decade with a number of universities, hospitals and laboratories in China to develop new technology and standards.
Enhancing the International Brand and Image of Beijing

A core competence of Procter and Gamble is our marketing expertise, and we know well the power of brands for consumers. I believe it equally true for a city’s brand or reputation internationally, which can be significantly aided via innovative marketing methodologies
In past years, we have worked with the governments of a number of cities, assisting in the development of their communication campaigns, helping the cities to build their desired images. I would like to make a similar offer to Beijing.

One example is the city of Cincinnati in the USA, where our company is headquartered.  There we help the local government design its city promotion program. The most special feature about this program is that an innovative mode of cooperation with the city government was adopted — P&G engaged in the feasibility study and planning of the program from the very start as well the on-going execution.  The theme of that program is “Life Happens Here-Downtown”. The campaign includes creative use of multidimensional media channels and promotional events, such as interactive websites, organization of conferences, exhibitions and fun fairs, and attraction of sponsors. As a result the image of the city was turned from a traditional heavy manufacturing site into a new attraction for holiday makers, tourists and shoppers. P&G is still working on further enhancing the branding of Cincinnati as part of the long-term cooperation with the city government.

The success of 2008 Olympics focused the eyes of the world to this city, and we believe that Beijing can build upon the success to enhance its desired image, by making known to as many as possible people its strengths, attributes and unique values. 

Procter and Gamble, as a corporate citizen of this city, is ready to share our expertise, and will be honored if we could be a partner with Beijing government in these marketing and branding efforts.

Conclusion

In conclusion I am honored to be a member of this advisory board. Procter & Gamble is committed to the growth and prosperity of this city and wishes to play our role in promoting greater consumption and the quality of life for residents and visitors. As Beijing evolves to the next stage of its development we are ready to assist in promoting greater innovation impacting a broad range of industries and services. Lastly, we are ready to bring our marketing expertise to bear so that Beijing can take its rightful place, and be recognized as such, among the tier one world cities.