Philip KotlerS.C. Johnson & Son Distinguished Professor of International Marketing

Kellogg School of Management, Northwestern University

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Why ASEAN?

ASEAN Community 2015

ASEAN Regional Marketing

Contents

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Why ASEAN?

ASEAN Community 2015

ASEAN Regional Marketing

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Robert J. SamuelsonNewsweek columnist

“The World is Still Round”

“The World is Flat”

Thomas L. Friedman New York Times columnist

The Paradox of Globalization vs. Localization

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Globalization

Localization

Regionalization

Regionalization: The Right Balance

ICT has allowed wide information access. Goods and services can move cheaper thanks to

cheap transportation and ICT. The world is more borderless. In a flat world, competition searches for lowest

cost.

National borders still have economic meaning. National markets exist and are defined by

psychology and politics. National economic and political setbacks can

threaten globalization.

Convenience of flows of information, goods, services, and people within the region

Relatively similar psychology and national interest within region

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The paradox has forced countries to form regional blocs

Source: Wikipedia.com

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Regionalization of Asia

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Regional Blocs, including East Asia will be prominentPrincipal blocs will be Europe, East Asia and the Americas.

The 21st Century is the Asian Century!

Asia will be almost half of the world’s economy by 2020

Global View of Asia

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Asia Pre-Crisis: The Flying Geese

Note:“Flying Geese” is a concept developed by Kaname Akamasu that best describes the economic structure of Asia before the crisis.

The formation resembled flying geese, headed by Japan, while the rest of the group followed. Countries toward the front tend to transfer “older” industries to countries at the back.

Before the crisis, “the flying geese” phenomenon was soaring throughout Asia and influencing the Pacific Rim economies.

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Asian Economic Crisis in 1997-1998: The End of “Flying Geese”, The end of the good old days of the Asian miracle

But the crisis put an end of “flying geese”.

Source: BBC

Asian Crisis

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After the crisis, squadrons of the former flying geese, who increasingly drive regional integration.

SAARC Squadron

ASEAN Squadron

China Squadron

Korea Squadron

Japan Squadron

Asia Post-Crisis: The Regional Squadrons

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Chindia, where the world's workshop meets its office

Manufacturing giant with the lowest prices

Hybrid communist-capitalist model that enables development

Solid primary schools Infrastructure that lures foreign

investment Good distribution of wealth with

higher per-capita income

Strong technology and service industry

Relatively efficient capital market

Strong private sector and legal framework

Younger workforce Growing population Great university system Strong entrepreneurial culture Attracts higher prices

Red tape, corruption, tough labor laws and bureaucracy all deter investment

Woeful infrastructure Lackluster primary education

system Exclusive growth environment

to the rich The privatization of key

industries has stopped

Heavy reliance on low prices Weak financial system Inefficient capital system Slow population growth

China India

Stre

ng

ths

Weakn

esses

Stre

ng

ths

Weakn

esses

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How should ASEAN ride the waveof the rising East (read: Chindia)?

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ASEAN Countries at a Glance

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The Rising East: Threat or Opportunity?

Threat Opportunity

ASEAN is the only region capable of being in the

driver seat of the Greater East Asia integration*

Individual countries in ASEAN are nothing

compared to Chindia

ASEAN Integration

* ASEAN is the first to seat ASEAN countries together with China, India, Japan, South Korea, Australia, and New Zealand, as well as Russia (as an observer) in one table during the first East Asia Summit.

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Initiated by ASEAN, the first East Asia Summit held in Kuala Lumpur, Malaysia, in December 2005, brought together leaders of the former flying geese, with the objective to establish the East Asia Free Trade

Area by 2015 and moving towards the New Asia.

(Observer)

The First East Asia Summit Driven by ASEAN

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Why is ASEAN in the Driving Seat of the Greater East Asia?

Neutral Position

ASEAN

High Bargaining Power

Attractive Single Regional Market

Competitive Regional

Production Base

Huge market High

consumption Less

competitive

Smooth flow of goods, services, and people under FTA

Abundance of natural resources

Low labor cost

ASEAN is not considered a “threat” to China, India,

Japan, South Korea, Australia, and New Zealand

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Why ASEAN?

ASEAN Community 2015

ASEAN Regional Marketing

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Single Regional MarketRegional Production Base

The Peaceful, Prosperous, and People-Centric ASEAN

ASEAN Security Community

(ASC)

ASEAN Economic Community

(AEC)

ASEAN Socio-Cultural

Community (ASCC)

ASEAN COMMUNITY 2015

Towards ASEAN Community 2015

Dual Track Strategy

Production/Supply Consumption/Demand

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What does ASEAN Integration Mean?

Tariffs will be eliminated and non-tariff barriers will be gradually phased out

Rules and regulations will be simplified and harmonized

ASEAN investors will be permitted to invest in sectors formerly closed to foreigners and the services sector will also be opened up

All barriers to the free flow of goods, services, capital, and skilled labor

are removed

The region will become a more level playing field

Applicable international standards and practices are followed, and policies on intellectual property rights and competition are put in place

Regional infrastructure will be more developed with the expansion of transportation, telecommunications and energy linkages

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Four Key Success Factors of ASEAN Integration

Rigorous Focus on High-Impact Sectors

Source: McKinsey&Company, ASEAN Competitiveness Study, 2003.

Workable Institutions

Continued Support by ASEAN Leaders

More Effective Public-Private Collaboration

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Corporate Trends Supporting ASEAN Integration

Global trends in manufacturing indicate a shift towards adopting flexible production techniques and integrated

production chains

It is no longer cost effective for all manufacturing activities to be done in in-house or in a single country

MNCs are integrating their manufacturing activities across several locations

MNCs are not only seeking large consumer markets but also regional sites where they can establish efficient production networks

Regional Production Base

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Potential Cost Savings from ASEAN Integration

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Benefits to MNCs Targeting more sales

volume in the ASEAN market

Components procurement on an ASEAN-wide basis

More product specialization to achieve economies of scale

Greater emphasis on profitability using ASEAN-wide operations

Benefits to Local Companies

More export opportunities to ASEAN market

ASEAN-wide expansion opportunity for corporate growth strategy

Technology and financial support opportunities from MNCs

ASEAN-wide pool of talent

A Balanced Approach is Needed

A Balanced Approach

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Why ASEAN?

ASEAN Community 2015

ASEAN Regional Marketing

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning Differentiation

Brand

Being Strategy Core Tactic

Value Indicator

What is Marketing?

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(mind-share)STRATEGY

(market-share)TACTIC

Differentiation

'CORE' TACTIC

ProcessVALUE

'ENABLER'

1 2 3 4 5 6

7

8

9

VALUE(heart-share)

Explore Engage

Execute

Positioning'BEING'

STRATEGY

Nine Core Elements of Marketing

S T

V

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LOCALS LOCALS

MULTI-NATIONALS

ASEAN

(1) THE LOCAL CHAMPIONS (2) THE LOCALS GOING ASEAN

(3) THE MULTINATIONALS

FOCUSING ON ASEAN

Three Types of ASEAN Marketing Companies

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Local Champions

SPlay small by serving niche markets

TAddress the local needs and wants

V Maintain high level of customer intimacy

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning Differentiation

Brand

Malaysia’s largest and most innovative and issuer of niche

cards

Selection of cards suited to niche segments

Early adoption of new card technologies

MBF Cards of Malaysia

MBF Cards

Local Champions

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning

Differentiation

Brand

The bakeshop with international

standards catering to Filipino taste

Varieties of Philippines original bakery products and cuisine

Understanding of Pinoy values and sentiments

Goldilocks of the Philippines

Goldilocks

Local Champions

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning Differentiation

Brand

The convenient gift and souvenir

options of hand-made premium

cakes, kueh, and cookies

High quality hand-made products with attractive and exclusive packaging

Convenience for order, delivery, and collection

Gift voucher packages

Bengawan Solo

Bengawan Solo of Singapore

Local Champions

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Locals Going Regional

STranslate the regional positioning to local context

TEnsure regional visibility and availability

V Build regional brand

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning

Differentiation

Brand

The affordable core essence of energy

drink for core generation

In sachets, not in bottles

Generation Biang (core generation)

Large retail distribution networks

Extra Joss of Indonesia

Extra Joss

Locals Going Regional

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning

Differentiation

Brand

Food houses that combine West and

East

Extensive Western and Asian (especially Thai) food and coffee menu

Wild Wild West name and décor

Large chain of outlets

Black Canyon of Thailand

Black Canyon

Locals Going Regional

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BRANDBRAND

Brand Integrity

Bra

nd Im

ageBrand Identity

Positioning

Differentiation

Brand

ASEAN no-frills and fun low-cost carrier

Low-cost structure Fun internal culture

AirAsia of Malaysia

AirAsia

Locals Going Regional

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MNCs Focusing on ASEAN

SCoordinate the regional strategy

TExecute the local customization

V Maintain the consistency of the global value

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Strategy Tactic Value

GlobalOffice

(Conceptor)

RegionalOffice

(Supervisor)

LocalOffice

(Operator)

Strategy Tactic Value

GlobalOffice

(Composer)

RegionalOffice

(Conductor)

LocalOffice

(Improviser)

ConsistentGlobalValue

CoordinatedRegionalStrategy

CustomizedLocalTactic

MNC Type 2 - MNC with Glorecalization Approach: Consistent global value,

Coordinated regional strategy, and Customized

local tactic (The 3C Formula)

MNC Type 1 - Strategy, Tactic, and Value are determined by the

global office with little modification. Regional and local offices merely act as supervisor

and operator.

Glorecalization Approach for MNCs

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Yamaha Motor

Consistent Global Value

Coordinated Regional Strategy

Customized Local Tactic

Yamaha Brand and “Three Tuning Forks” logo The spirit of creating “Kando” (feelings of deep

satisfaction and excitement) as the brand mission Yamaha technology and production

“Growth” strategy for ASEAN “Profitability” strategy for US and Europe

Different product mix for each ASEAN country Different communication approach for each ASEAN

country

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Toyota Kijang

Consistent Global Value

Coordinated Regional Strategy

Customized Local Tactic

Toyota Brand and “Three Ovals” logo Japan-quality manufacturing Sales, Service, and Spare parts businesses

Positioning: ASEAN Family Car

Different communication approach for each ASEAN country

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Conclusions

• ASEAN is a regional bloc of 550 million customers with rich resources.

• ASEAN is sure to get attention from MNCs and investors both as a source of products and a market for products.

• ASEAN will bring benefits to the companies in all 10 ASEAN countries because it will lower their costs and provide larger opportunities .