International Marketing 463-441 (3-0-3)

Lecture 2The ASEAN and ASIAN Region

Country Thailand Malaysia Singapore Philippines Indonesia Vietnam

Population 65,068,149 24,821,286 4,553,009 91,077,287 234,693,997 85,262,356

Age Structure 0-14 21.6%

15-64 70.1%

65+ 8.2%

0-14 32.2%

15-64 62.9%

65+ 4.8%

0-14 15.2%

15-64 76.3%

65+ 8.5%

0-14 34.5%

15-64 61.3%

65+ 4.1%

0-14 28.7%

15-64 65.6%

65+ 5.7%

0-14 26.3%

15-64 67.9%

65+ 5.8%

Sex Ratio 0.979M/F 1.027M/F 0.954M/F 0.999M/F 1.05M/F 1.07M/F

Pop. Growth 0.663% 1.759% 1.275% 1.764% 1.213% 1.004%

GDP US$596.5 B US$132.3B US$122.1B US$449.8B US$948.3 B US $262.5 B

Budget Expenditure US$36.61B US38.89 B US18.8B US $19.07 B US $77.39B US $15.9 B

Exports US $128.2 B US$160.8B US$289.4 B US $46.16 B US $102.4B US $39.9 B

Imports US $113.4 B US $124 B US$244.6B US 53.13 B US 73 B US $40.6 B

GDP Per capita (PPP)

US$9,200 US$12,800 US$31,400 US$5,000 US $3,900 US $3,100

Income Distribution Lowest 10% 2.7%

Highest 10% 33.4%

Lowest 10% 1.4%

Highest 10% 39.2%

N/A Lowest 10% 2.2%

Highest 10% 34.2%

Lowest 10% 3.6%

Highest 10% 28.5%

Lowest 10% 2.9%

Highest 10% 28.9%

Poverty 10% 5.1% N/A 40% 17.8% 19.5%

Mobile Phone Users 40.8 million 19.424 Million 4.789 Million 42.869 Million 63,809 Million 15.505 Million

Internet Users 8.466 million 11,292 Million 1.71 Million 4.615 Million 16 Million 14.658 Million

Economic Comparison of Major ASEAN Countries(Source https://www.cia.gov/library/publications/the-world-factbook)

Economic Comparison of ASEAN Countries to Other Major Economies

(Source https://www.cia.gov/library/publications/the-world-factbook)

Country Selected

ASEAN

US China India Japan EU

Population 505,476,084 301,139,947 1,321,851,888 1,129,866,154 127,433,494 490,426,060

Age Structure 0-14 20.2%

15-64 67.2%

65+ 12.8%

0-14 20.4%

15-64 71.1%

65+ 7.9%

0-14 31.8%

15-64 63.1%

65+ 5.1%

0-14 13.8%

15-64 65.2%

65+ 21%

0-14 15.72%

15-64 67.16%

65+ 17.11%

Sex Ratio 1.027M/F 1.06M/F 1.064M/F 0.953M/F 0.96M/F

Pop. Growth 0.894% 0.606% 1.606% -0.088% 0.16%

GDP US2,511.5 B US$13.16 Tr US$10.21 Tr US$4.164 T US$4.218 T US $13.08 T

Budget Expenditure

US$766.86B US2.655 Tr US515.8B US $127.8 B US $1.586 T

Exports US 766.86 B US$1.023Tr US$969.7 B US $123.1 B US $615.8B US $1.33 T

Imports US 648.73 B US $1.861 T US$751.9 B US 184 B US 543.5 B US $1.466 T

GDP Per capita (PPP)

US $4,900 US$43,800 US$7,800 US$3,800 US $33,100 US $29,900

Income Distribution

Lowest 10% 2.9%

Highest 10% 30.49%

Lowest 10% 1.9%

Highest 10% 29.9%

Lowest 10% 1.6%

Highest 10% 34.9%

Lowest 10% 3.6%

Highest 10% 31.1%

Lowest 10% 4.8%

Highest 10% 21.7%

Lowest 10% 2.8%

Highest 10% 25.1%

Poverty 19.3% 12% 10% 25% N/A

Mobile Phone Users

187.2 million 233 Million 461 Million 166.1 Million 101.7 Million 466 Million

Internet Users 56.65 million 208 Million 131 Million 60 Million 87.55 Million 247 Million

Thailand Malaysia Indonesia Philippines Vietnam Australia

Middle Class

Per capita Income US $7,551 US $3,957 US $3,429 US $4,535 US $3,078 US $29,959

Population 52,054,519 19,857,028 187,755,197 72,861,829 58,148,926 16,347,340

Upper Class

Per Capita Income US $30,618 US $20,894 US $11,515 US $16,890 US8,8975 US $83,853

Population 6,506,814 2,482,126 23,469,399 9,107,728 8,526,235 2,043,417

Income for Middle & Upper Economic Classes

Wealthy

TransitionMiddleClass

Poverty

ChinaLDCs NIEs

Thailand Malaysia Singapore Indonesia Philippines Vietnam

Ethnic Backgrounds

Thai 75% Chinese 14% Other 11%

Malay 50.4%, Chinese 23.7%, Indigenous 11%,

Indian 7.1%, Others 7.8%

Chinese 76.8%, Malay 13.9%, Indian 7.9%, Other 1.4%

Javanese 40.6%,

Sundanese 15%, Madurese

3.3%, Minankabau 2.7%, Betawi 2.4%, Bugis

2.4%

Tagalog 28.1%, Cebuano

13.1%, Ilocano 9%,

Bisaya/Binisaya 7.6%,

Hiligaynon Ilonggo 7.5%,

Bikol 6%, Waray 3.4%

Kinh (Viet) 86.2%, Tay 1.9%, Thhai

1.7%, Muong 1.5%, Khome

1.4%, Hoa 1.1%, Nun

1.1%, Hmong 1%

Religions Buddhist 94.6% Muslim 4.6%

Christian 0.7%

Muslim 60.4%, Buddhist 19.2%, Christian 9.1%,

Hindu 6.3%, Traditional

Chinese 2.6%

Buddhist 42.5%, Muslim 14.9%, Taoist 8.5%, Hindu 4%,

Catholic 4.8%, other Christian

9.8%

Muslim 86.1%, Protestant 5.7%, Roman Catholic 3%, Hindu 1.8%

Roman Catholic 80.8%, Muslim 5%, Evangelical 2.8%, Iglesia ni

Kristo 2.3%, Aglipayan 2% other Christian

4.5%

Buddhist 9.3%, Catholic 6.7%, Hoa Hao 1.5%, Cao Dai 1.1%,

Protestant 0.5%, Muslim 0.1%, none 80.8%

Languages Thai, English and ethnic, regional

dialects

Bahasa Malaysia, English,

Chinese, Tamil, Telugu, Punjabi,

Thai, Iban, Kadazan

Mandarin 35%, English 23%, Malay 14.1%,

Hokkien 11.4%, Cantonese

5.7%, Teochew 4.9%, Tamil

3.2%

Bahasa Indonesia,

English

Tagalog, with 8 dialects, English

Vietnamese, English, some

French, Chinese and Khmer, mountain languages

% Rural/Urban

71/28% 37/63% 0/100% 54/46% 39/61% 75/25%

Some Other ASEAN Indicators

Geography(Climate, Topography, Flora, Fauna, Microbiology)

History

Technology and Political Economy

Social Institutions(Family, Religion, School, Media, Government, Corporations)

PeersElements of Culture

(Values, rituals, symbols, beliefs, though processes

Consumption decisions and behaviours Management Styles

Consequences

Ad

apta

tio

n

So

cial

isa

tio

n

Ap

pli

cati

on Imitation

Market Structure

Adapted from Cateora & Graham P. 99

Actualisation

(The Artist) Self-fulfillment

Rice

Soap Fresh

Vegetables

Most Household Cleaning Products

Water Purifiers

Fashion Clothes (e.g. Jeans)

Chewing Gum

Car Air Fresheners

Travel & Vacations Fine Fragrances

Aromatherapy products Luxury cars

Nutraceuticals & herbs

Books Fine Dining & Processed Foods

Study after retirement Fresh vegetables (Organic)

Esteem (The Executive)

Achievement, prestige,fulfillment

Social (Worker) Family, relationships,

workgroups

Safety (The Farmer) Home, Security and stability

Physiological (The Hunter) Basic Biological Needs – Food, water, air

Staples: based on survival (fear)

Necessities: based on what is good (existence)

Community: (acceptance)

Responsibility: (hope)

Fulfillment: (dreams)

Singapore, Brunei

Malaysia, Thailand

Indo, Philip, Viet

Camb,Laos

Economy(Central)

SocialCultural

Political legal

Technology

Market

Immediate

Primary

Incremental

Ultimate

Regulation Educa

tion

InspirationCre

ation

Accomm

odation

AdoptionDestruction

Decon

struc

tion

Kotler, et. Al., Think ASEAN

Adapt

ion

RationalizationAcceleration

Coordination

Redefinition

Realization Formation

The Forces of Change in the

Business Landscape Digitization

Globalization

FuturizationPeace

(Regional Peace and security)

Prosperity(Economic

integration and cooperation)

People(Human and social

development๗

Economy Social-CulturalPolitical Legal

Technology

Market

Certain/Uncertain Important/Unimportant

ChangeValue Migrator

TOWS Examination

Value Determiner

CustomerCommitted, Lost, New

Value Decider

Company Existing competence,

Risk, Attitude, Stretch Possibility

Value Supplier

Competitor Winner, Loser,

Emerging

Go invest No-Go/Hold

Harvest Divest

Choice

Kotler, et. al, Think ASEAN P. 6

The Diamond 4C Sub-Model

Casualties

Traditional Economies New Economies

Markets Stable Dynamic

Scope of competition National (or regional) Global

Organizational form Hierarchical / Bureaucratic Networked/Entrepreneurial

Key production factor Labour and Capital Knowledge and innovation

Importance of research Moderate Critical

Nature of employment Stable Risk and opportunity

Regulation Commend and Control Market Orientated Flexibility

Kotler, et. al, Think ASEAN P. 49

Disparity Between the “Traditional” Economies and the “Knowledge-Based” Economies

Traditional Businesses Future Businesses

Markets National, Overseas subject to tariffs Trading block, free trade zones

Scope of Competition National or regional: Protectionist Global, liberalised

Organisational Structure Hierarchical, bureaucratic, specific scope, localised

Networked, entrepreneurial, multidisciplinary, empowerment

Key Productivity Factor Labour (skills), capital, in-house expertise, durability

Knowledge, innovation, outsourcing, offshoring, time to market

Importance of Research Moderate, imitate and improve Critical, innovate and invent

Nature of engagement Mandate, relationship, intuition Opportunistic, free trade, due diligence

Regulation/Governance Top down silo, closed group Connected matrix, transparency

Strategic Management Inside out- SWOT-strengths, weaknesses, opportunities, threats

Outside in – TOWS- threats, opportunities, weaknesses, strengths

Strategic Marketing 3 Cs – customer, competition, company, 4 Ps – product, place, promotion, pricing

4 Cs – change, customer, competition, company PDB triangle – positioning, differentiation, brand

Marketing Focus Product centric distribution Customer centric service

Growth Strategy Market share Sustainability

Changing Business Landscape

Kotler, et. al, Think ASEAN P. 54-55

Significant forces of change

New rules of the game

New Value Propositions

New value requirements

WinningValueapp

New Competitive

setting indications

New Customer

profile indicators

F8 + E8 “Total Get”Value = __________ = __________ P + Oe “Total Give”

Value Migrator

Company

Existing competence Risk-attitude Stretch possibility

The New Landscape Configuration

Kotler, et. al, Think ASEAN P. 77

Competitive Rivalries Lemongrass quick yield and straightforward to cultivate and distil – expect high elasticity of supply from both existing and new producers. Producers of substitutes very aggressive

Bargaining Power of Suppliers Collecting the most suitable planting material require effort. Extraction and harvest .technology needs to be acquired or developed Analytical equipment or service maybe expensive/remote.

Substitutes Citral (main constituents) can be produced from a number of chemical feed stocks. Alternative oils (litsea cubeba) cost much less to produce. Lemon myrtle oil much smoother and acceptable to end users Many alternatives to lemongrass in product formulations.

Trends & Technology Alternative technologies to steam distillation (CO2) can make much smoother oil but will increase capital needs greatly. Natural, exotic, organic, FAIRTRADE could increase oils popularity (?) if seen as exotic.

Substitutes

Tre

nd

s &

Te

ch

no

log

y

Bargaining power of buyers

Bargaining power of suppliers

Competitive Rivalries

Re

gu

lati

on

Regulation SCCP placed lemongrass oil under scrutiny as a cosmetic ingredient in EU.

Industry Competitors

Intensity of Rivalry

Bargaining Power of Buyers Currently small item of trade in flavour industry, strong relationships with established producers.

Scope

Global

Regional

Local

Contextual and political knowhow

Low resource costs Technology and Marketing

Domestic players both large and small – Chinese SMEs, overseas Chinese firms,

national companies

Regional National ChampionsCP, Singapore Telecom

Multinational firms

Basis of Competitive Advantage

Competitors in Asia

Sourcing CountriesSouth China ASEAN

Key Countries JapanChinaTaiwanSouth Korea

Emerging CountriesThailandIndonesiaMalaysiaIndiaPhilippinesVietnam

Marketing CountriesMyanmarLaos, Cambodia

Platform CountriesSingaporeHong Kong

Entry Growth Consolidation

Establish a base to learn, collect information and set up contracts

Set up a regional office to coordinate efforts

Regional office for administration

of synergies

Agents Representative

office

Establish initial investment through

JV or local subsidiary

Joint ventures representative offices

Distributors

Initiate several business activities multiple presence

Rationalization

Joint venture Acquisition Greenfield

Expand

Sourcing office OEM Contracts

Offshore factories in export zones

JV with resource rich partners

Integrate into global/regional

operations

MNC Development According to Country Development

Start up in Trading

Investment in industrial activities, either direct or through

joint ventures

Progressive vertical

integration in upstream activities

Real Estate

Banking & Financial Services

Diversified Activities

Diversified Activities

The

Golden

Diam

ond

Finance

Manufacturing

Property Trade

Typical Evolution of Chinese Groups

in ASEAN

Lasserre & Schutte, P. 132

Salim Group (Lim Soe Liong)

Cement, Automobiles, flour, floods, chemicals, banking, property, insurance

Sinar Mas (Eka Tiga Wijaya):

Paper, pulp, chemicals, agribusiness, finance, property

Asta (W. Soeryadjaya):

Automobiles, heavy equipment, office equipment, agribusiness,

property, finance

The Kuok Group (Robert Kuok)

Plantations, edible, flour, shipping, hotels, mining, computer services, retail,

film distribution

Hong Leong (Quek Leng Chan)

Banking, Insurance, car distribution, construction, building materials, manufacturing

Genting Group (Lim Goh Tong)

Hotels, Casinos, resorts, plantations, property, paper mills, power generation

Charoen Pokphand (Dhanin Chearavanont)

Feed Mills, poultry, chemicals, automatics, telecommunications, textiles, property

Bangkok Bank (Charti Sophonpanich)

Banking, Insurance, financial services

Siam Motors (Khunying Phornthip)

Automobiles, musical instruments

China

Units per 100 Households (Rural)

Units per 100 households (Urban)

National Average

Bicycle 121.3 142.7 128.1

Motorcycle 28.1 22.2 26.2

Car N/A 0.9 N/A

Radio Cassette Recorder 20.4 47.9 26.2

Colour Television 60.5 126.4 81.2

B/W Television 48.1 N/A N/A

Telephone 40.8 93.7 57.4

Mobile Phone 13.7 62.9 29.2

Air conditioner 2.3 44.1 16.2

Camera 3.3 44.1 16.2

Electric fan 134.3 182.6 149.5

Hi-Fi System 9.7 25.2 14.6

Refrigerator 14.8 87.4 37.7

Video Recorder 3.3 18.4 8.1

Washing Machine 31.8 92.8 51.1

Ownership of Consumer Durable Goods in China (2002)

China Statistics Handbook 2003

Differentiation

Modernisation

Egalitarianism

Traditionalism

Thoughts of Chairman Mao

Yuppie Fashion

Change in Consumer Behaviour in China

Lasserre & Schutte, P. 74

Traditional Values Communist Values

Emerging Values

EgalitarianismCountry Orientation

PartyClass Background

Sacrifice

Less HierarchicalIndividualist/Materialist

Hero EntrepreneurHere and now orientation

More direct communication

HierarchyFamily orientation

Societal orderRelationships

HarmonySeniority

Face Saving

Lasserre & Schutte, P. 80

Chinese Culture in Flux and Transformation

Marketing Effort/Time

Sales

Marketing Potential

Concave Function: Elite Segment

S-Curve Function: Transition Segment

S-Curve Function: Traditional Segment

Sales Response Function to Income

Lasserre & Schutte, P. 71

Technology and Marketing

Advantages

High

Low

No Specific cost advantages based

on volume

Based on volume and local knowledge

Advantages based on local knowledge only

Cottage Industries

Differentiated PositioningApplied to high end

segmentsPrice premiumLow VolumeHigh costsHigh Tech

Strong Brands

Most Western Competitors

Cost LeadershipPositioning applied to high volume low-end segments

Low CostMass distribution

Large Chinese competitors (Kanko, Haier)

Emerging BattlefieldLow Cost

Mass DistributionDifferentiated

Large Chinese Companies, (Huawei, TGL), and some Western companies

Cost Advantages

Competitive Positioning in China

A Look at the Malaysian Retail Market Channels

Manufacturer

National Distributors

Wholesalers

Consumers

Hypermarkets Super- markets

Sundry Stores

Convenience Stores

Chinese Medical Halls

Malaysian Retail MarketChannels & Structure

Hypermarkets

• Hypermarkets make up approximately 15% of the national market. Tesco (12), Carrefour (12) and Giant (20), dominate this sector. Makro (8) is a closed system for wholesalers and small business customers, although this policy varies from time to time. There are approximately 50 hypermarkets in Malaysia.

Supermarkets

• Supermarkets can be broken down into two categories. Those foreign owned and part of a chain like Jaya Jusco (7) and Giant (numbering around 65), locally owned groups like Fajar (16), Suiwah (6) and Econsave (16),(numbering around 100) and those locally owned independent supermarkets with no affiliations (numbering around 220). This is approximately 25% of the market.

Sundry Stores

• Approx. 80,000 in Malaysia in both urban and rural areas, majority independently owned small family businesses. Attempts have been made to franchise or develop chains like Felda and Pernama, but not so successful. This is about 30% of the market.

Convenience Stores

• These usually franchised stores are rapidly growing in numbers as both 7-Eleven & the petrol companies have seen opportunities to enter into the retail trade. Their market share is approximately 6% but rapidly rising.

Chinese Medical Halls

• Traditional Chinese medical halls are scattered across the country and often develop into a small supermarket or sundry store. They, together with pharmacies have around 14% market-share but this is losing out to the convenience stores and chain pharmacies. About 6,000.

Pharmacy

• Pharmacies primarily part of chains like giant, but still number of independents. They are specialist stores usually selling OTC and widening ranges to include herbs and nutraceuticals.

Other• A specialist group that sells confectionary,

OTC drugs and FMCG goods. Number around 200.

• Sell books, magazines, Newspapers, drinks, etc.

• An emporium group with 10 stores throughout Malaysia specialising in emporium items and some FMCG.

FMCG Market Fragmentation/Concentration Comparison Between Malaysia, Thailand, Hong Kong

and Australia Outlet Type Malaysia Thailand Hong Kong Australia

Hyper & Supermarkets (Chain Owned)

20% 68% 91% 85%

Independent Hyper & Supermarkets

20% 2% 2% 10%

Wholesale Trade – Sundry & convenience Stores

57% 10% 2% 3%

Other 3% 20% Convenience

Chains

5% 2%

Klang Valley & Central Region (N. Sembilan)

35%

Southern Region (Johor & Melaka)

15%

Perak 8%

Penang 5%

Kedah/Perlis 15%

Pahang 8%

Kelantan/Terengganu 8%

East Malaysia 6%

Approximate National Market Break-Up

Barriers to Entry

Market Fragmentation

Centralisation

Merchandising

The way of doing business

Guanxi

Financial Issues

Competitive Context

Clarity of Rules

Political, Legal, and

Ethical Context Familiarity

Clear

Unclear

Not Familiar FamiliarVietnam

South Korea

Indonesia

Philippine

China

India

Thailand

Malaysia

Taiwan

Hong Kong

Japan

Singapore

Perceptions of the Accessibility of the

Asian Pacific Region

Lasserre & Schutte, P. 184

Reliability

Easy to Obtain

Definitely No Definitely yesVietnam

South Korea

Indonesia

Philippine

China

India

Thailand

Malaysia

Taiwan

Hong Kong

Japan

Singapore

Strategic Market Information the

Asian Pacific Region

Lasserre & Schutte, P. 189

Definitely yes

Definitely No