Philip Kotler S.C. Johnson & Son Distinguished Professor of International Marketing Kellogg School of Management, No

1. Philip Kotler S.C. Johnson & Son Distinguished Professor of International Marketing Kellogg School of Management, Northwestern University

2. Contents Why ASEAN? ASEAN Community 2015 ASEAN Regional Marketing

3. Why ASEAN? ASEAN Community 2015 ASEAN Regional Marketing

4. The Paradox of Globalization vs. Localization “The World is Flat” Thomas L. Friedman New York Times columnist “The World is Still Round” Robert J. Samuelson Newsweek columnist

5. Regionalization: The Right Balance Globalization • 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. • Convenience of flows of information, goods, services, and people within the region • Relatively similar psychology and national interest within region Regionalization Localization • National borders still have economic meaning. • National markets exist and are defined by psychology and politics. • National economic and political setbacks can threaten globalization.

6. The paradox has forced countries to form regional blocs Source: Wikipedia.com

7. Regionalization of Asia

8. Global View of Asia • Regional Blocs, including East Asia will be prominent Principal 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

9. Asia Pre-Crisis: The Flying Geese Before the crisis, “the flying geese” phenomenon was soaring throughout Asia and influencing the Pacific Rim economies. 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. Note: “Flying Geese” is a concept developed by Kaname Akamasu that best describes the economic structure of Asia before the crisis.

10. Asian Crisis But the crisis put an end of “flying geese”. Source: BBC Asian Economic Crisis in 1997-1998: The End of “Flying Geese”, The end of the good old days of the Asian miracle

11. Asia Post-Crisis: The Regional Squadrons After the crisis, squadrons of the former flying geese, who increasingly drive regional integration. SAARC Squadron China Squadron Korea Squadron Japan Squadron ASEAN Squadron

12. Chindia, where the world's workshop meets its office India China • 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 • 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 Strengths Strengths • 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 Weaknesses Weaknesses

13. How should ASEAN ride the wave of the rising East (read: Chindia)?

14. ASEAN Countries at a Glance

15. The Rising East: Threat or Opportunity? Opportunity Threat ASEAN Integration 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 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.

16. The First East Asia Summit Driven by ASEAN 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)

17. Why is ASEAN in the Driving Seat of the Greater East Asia? ASEAN Neutral Position High Bargaining Power ASEAN is not considered a “threat” to China, India, Japan, South Korea, Australia, and New Zealand 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

18. Why ASEAN? ASEAN Community 2015 ASEAN Regional Marketing

19. Towards ASEAN Community 2015 ASEAN COMMUNITY 2015 ASEAN Security Community (ASC) ASEAN Economic Community (AEC) ASEAN Socio-Cultural Community (ASCC) The Peaceful, Prosperous, and People-Centric ASEAN Regional Production Base Single Regional Market Consumption/Demand Production/Supply Dual Track Strategy

20. 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 • 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 The region will become a more level playing field

21. Four Key Success Factors of ASEAN Integration Rigorous Focus on High-Impact Sectors Workable Institutions Continued Support by ASEAN Leaders More Effective Public-Private Collaboration Source: McKinsey&Company, ASEAN Competitiveness Study, 2003.

22. 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

23. Potential Cost Savings from ASEAN Integration

24. A Balanced Approach is Needed 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

25. Why ASEAN? ASEAN Community 2015 ASEAN Regional Marketing

27. What is Marketing? Brand Integrity Positioning Differentiation Core Tactic Being Strategy BRAND Brand Brand Image Brand Identity Value Indicator

28. Nine Core Elements of Marketing S T V

29. Three Types of ASEAN Marketing Companies (3) THE MULTINATIONALS FOCUSING ON ASEAN MULTI- NATIONALS ASEAN LOCALS LOCALS (2) THE LOCALS GOING ASEAN (1) THE LOCAL CHAMPIONS

30. Local Champions S Play small by serving niche markets T Address the local needs and wants V Maintain high level of customer intimacy

31. MBF Cards of Malaysia Local Champions Positioning Differentiation Brand Integrity • Selection of cards suited to niche segments • Early adoption of new card technologies Malaysia’s largest and most innovative and issuer of niche cards Brand BRAND Brand Image Brand Identity MBF Cards

32. Goldilocks of the Philippines Local Champions Positioning Differentiation Brand Integrity • Varieties of Philippines original bakery products and cuisine • Understanding of Pinoy values and sentiments The bakeshop with international standards catering to Filipino taste Brand BRAND Brand Image Brand Identity Goldilocks

33. Bengawan Solo of Singapore Local Champions Positioning Differentiation Brand Integrity • High quality hand-made products with attractive and exclusive packaging • Convenience for order, delivery, and collection • Gift voucher packages The convenient gift and souvenir options of hand-made premium cakes, kueh, and cookies Brand BRAND Brand Image Brand Identity Bengawan Solo

34. Locals Going Regional S Translate the regional positioning to local context T Ensure regional visibility and availability V Build regional brand

35. Extra Joss of Indonesia Locals Going Regional Positioning Differentiation Brand Integrity • In sachets, not in bottles • Generation Biang (core generation) • Large retail distribution networks The affordable core essence of energy drink for core generation Brand BRAND Brand Image Brand Identity Extra Joss

36. Black Canyon of Thailand Locals Going Regional Positioning Differentiation Brand Integrity • Extensive Western and Asian (especially Thai) food and coffee menu • Wild Wild West name and décor • Large chain of outlets Food houses that combine West and East Brand BRAND Brand Image Brand Identity Black Canyon

37. AirAsia of Malaysia Locals Going Regional Positioning Differentiation Brand Integrity • Low-cost structure • Fun internal culture ASEAN no-frills and fun low-cost carrier Brand BRAND Brand Image Brand Identity AirAsia

38. MNCs Focusing on ASEAN S Coordinate the regional strategy T Execute the local customization V Maintain the consistency of the global value

39. Glorecalization Approach for MNCs 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. Strategy Tactic Value Strategy Tactic Value Consistent Global Office (Conceptor) Global Office (Composer) Global Value Coordinated Regional Office (Supervisor) Regional Office (Conductor) Regional Strategy Local Office (Operator) Local Office (Improviser) Customized Local Tactic

40. Yamaha Motor Consistent Global Value • 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 Coordinated Regional Strategy • “Growth” strategy for ASEAN • “Profitability” strategy for US and Europe Customized Local Tactic • Different product mix for each ASEAN country • Different communication approach for each ASEAN country

41. Toyota Kijang Consistent Global Value • Toyota Brand and “Three Ovals” logo • Japan-quality manufacturing • Sales, Service, and Spare parts businesses Coordinated Regional Strategy • Positioning: ASEAN Family Car Customized Local Tactic • Different communication approach for each ASEAN country

42. 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 .