International Marketing 463-441 (3-0-3) Lecture 2The ASEAN and ASIAN Region
Economic Comparison of Major ASEAN Countries (Source https://www.cia.gov/library/publications/the-world-factbook)Country Thailand Malaysia Singapore Philippines Indonesia VietnamPopulation 65,068,149 24,821,286 4,553,009 91,077,287 234,693,997 85,262,356Age Structure 0-14 21.6% 0-14 32.2% 0-14 15.2% 0-14 34.5% 0-14 28.7% 0-14 26.3% 15-64 70.1% 15-64 62.9% 15-64 76.3% 15-64 61.3% 15-64 65.6% 15-64 67.9% 65+ 8.2% 65+ 4.8% 65+ 8.5% 65+ 4.1% 65+ 5.7% 65+ 5.8%Sex Ratio 0.979M/F 1.027M/F 0.954M/F 0.999M/F 1.05M/F 1.07M/FPop. 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 BBudget Expenditure US$36.61B US38.89 B US18.8B US $19.07 B US $77.39B US $15.9 BExports US $128.2 B US$160.8B US$289.4 B US $46.16 B US $102.4B US $39.9 BImports US $113.4 B US $124 B US$244.6B US 53.13 B US 73 B US $40.6 BGDP Per capita US$9,200 US$12,800 US$31,400 US$5,000 US $3,900 US $3,100(PPP)Income Distribution Lowest 10% Lowest 10% N/A Lowest 10% Lowest 10% Lowest 10% 2.7% 1.4% 2.2% 3.6% 2.9% Highest 10% Highest 10% Highest 10% Highest 10% Highest 10% 33.4% 39.2% 34.2% 28.5% 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 MillionInternet Users 8.466 million 11,292 Million 1.71 Million 4.615 Million 16 Million 14.658 Million
Economic Comparison of ASEAN Countries to Other Major Economies (Source https://www.cia.gov/library/publications/the-world-factbook)Country Selected US China India Japan EU ASEANPopulation 505,476,084 301,139,947 1,321,851,888 1,129,866,154 127,433,494 490,426,060Age Structure 0-14 20.2% 0-14 20.4% 0-14 31.8% 0-14 13.8% 0-14 15.72% 15-64 67.2% 15-64 71.1% 15-64 63.1% 15-64 65.2% 15-64 65+ 12.8% 65+ 7.9% 65+ 5.1% 65+ 21% 67.16% 65+ 17.11%Sex Ratio 1.027M/F 1.06M/F 1.064M/F 0.953M/F 0.96M/FPop. 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 TBudget US$766.86B US2.655 Tr US515.8B US $127.8 B US $1.586 TExpenditureExports US 766.86 B US$1.023Tr US$969.7 B US $123.1 B US $615.8B US $1.33 TImports US 648.73 B US $1.861 T US$751.9 B US 184 B US 543.5 B US $1.466 TGDP Per capita US $4,900 US$43,800 US$7,800 US$3,800 US $33,100 US $29,900(PPP)Income Lowest 10% Lowest 10% Lowest 10% Lowest 10% Lowest 10% Lowest 10%Distribution 2.9% 1.9% 1.6% 3.6% 4.8% 2.8% Highest 10% Highest Highest 10% Highest 10% Highest 10% Highest 10% 30.49% 10% 29.9% 34.9% 31.1% 21.7% 25.1%Poverty 19.3% 12% 10% 25% N/AMobile Phone 187.2 million 233 Million 461 Million 166.1 Million 101.7 Million 466 MillionUsersInternet Users 56.65 million 208 Million 131 Million 60 Million 87.55 Million 247 Million
Income for Middle & Upper Economic Classes Thailand Malaysia Indonesia Philippines Vietnam AustraliaMiddle ClassPer capita Income US $7,551 US $3,957 US $3,429 US $4,535 US $3,078 US $29,959Population 52,054,519 19,857,028 187,755,197 72,861,829 58,148,926 16,347,340Upper ClassPer Capita Income US $30,618 US $20,894 US $11,515 US $16,890 US8,8975 US $83,853Population 6,506,814 2,482,126 23,469,399 9,107,728 8,526,235 2,043,417 Wealthy Transition Middle Class Poverty LDCs NIEs China
Some Other ASEAN Indicators Thailand Malaysia Singapore Indonesia Philippines Vietnam Ethnic Thai 75% Chinese Malay 50.4%, Chinese 76.8%, Javanese Tagalog 28.1%, Kinh (Viet)Backgrounds 14% Other 11% Chinese 23.7%, Malay 13.9%, 40.6%, Cebuano 86.2%, Tay Indigenous 11%, Indian 7.9%, Sundanese 13.1%, Ilocano 1.9%, Thhai Indian 7.1%, Other 1.4% 15%, Madurese 9%, 1.7%, Muong Others 7.8% 3.3%, Bisaya/Binisaya 1.5%, Khome Minankabau 7.6%, 1.4%, Hoa 2.7%, Betawi Hiligaynon 1.1%, Nun 2.4%, Bugis Ilonggo 7.5%, 1.1%, Hmong 2.4% Bikol 6%, Waray 1% 3.4% Religions Buddhist 94.6% Muslim 60.4%, Buddhist 42.5%, Muslim 86.1%, Roman Catholic Buddhist 9.3%, Muslim 4.6% Buddhist 19.2%, Muslim 14.9%, Protestant 5.7%, 80.8%, Muslim Catholic 6.7%, Christian 0.7% Christian 9.1%, Taoist 8.5%, Roman Catholic 5%, Evangelical Hoa Hao 1.5%, Hindu 6.3%, Hindu 4%, 3%, Hindu 1.8% 2.8%, Iglesia ni Cao Dai 1.1%, Traditional Catholic 4.8%, Kristo 2.3%, Protestant 0.5%, Chinese 2.6% other Christian Aglipayan 2% Muslim 0.1%, 9.8% other Christian none 80.8% 4.5%Languages Thai, English and Bahasa Mandarin 35%, Bahasa Tagalog, with 8 Vietnamese, ethnic, regional Malaysia, English 23%, Indonesia, dialects, English English, some dialects English, Malay 14.1%, English French, Chinese Chinese, Tamil, Hokkien 11.4%, and Khmer, Telugu, Punjabi, Cantonese mountain Thai, Iban, 5.7%, Teochew languages Kadazan 4.9%, Tamil 3.2% % 71/28% 37/63% 0/100% 54/46% 39/61% 75/25%Rural/Urban
Geography (Climate, Topography, Flora, Fauna, Microbiology) Adapted from Cateora & Graham P. 99 HistoryAdaptation Technology and Political Economy Social Institutions Socialisation (Family, Religion, School, Media, Government, Corporations) Application Imitation Elements of Culture Peers (Values, rituals, symbols, beliefs, though processes Consequences Consumption decisions Market and behaviours Management Styles Structure
Malaysia, Thailand Singapore, Brunei Indo, Philip, Viet Fulfillment: (dreams) Actualisation (The Artist) Study after retirement Self-fulfillment Fresh vegetables (Organic) BooksFine Dining & Processed Foods Aromatherapy products Camb, Luxury cars Esteem Nutraceuticals & herbs Laos Travel & Vacations (The Executive) Achievement, Fine Fragrances prestige,fulfillmentCar Air Fresheners Responsibility: (hope) Fashion Clothes (e.g. Social (Worker) Jeans) Chewing Gum Family, relationships, workgroups Community: (acceptance) Most Water Household Purifiers Safety (The Farmer) Home, Security and stability Cleaning Necessities: based on what is good (existence) Products FreshSoap Vegetables Physiological (The Hunter) Rice Basic Biological Needs – Food, water, air Staples: based on survival (fear)
The Forces of PrimaryChange in the Technology In Business sp n ira Landscape a tio Digitization t io re n C n Ac io co ct ru m st m on Destruction Adoption od ec at io D n Political Coordination Social legal Cultural Economy (Central) Globalization Immediate Incremental Acceleration Rationalization Re n tio de Realization Formation ap f in Ad itio n R Prosperity n eg Peace tio ul (Economic People Futurization a at (Regional uc io integration and (Human and social Ed Peace andn development๗ cooperation) Market security) Ultimate Kotler, et. Al., Think ASEAN
Value Migrator Change Certain/Uncertain Technology Important/Unimportant Political Legal Economy Social-Cultural Market Value Supplier Value Determiner Competitor Customer TOWS Examination Winner, Loser, Committed, Lost, New Emerging Value Decider Company Existing competence, Risk, Attitude, Stretch PossibilityThe Diamond 4C Sub-Model Choice Go invest No-Go/Hold Harvest Divest Kotler, et. al, Think ASEAN P. 6
Disparity Between the “Traditional” Economies and the “Knowledge-Based” Economies Traditional Economies New EconomiesMarkets Stable DynamicScope of competition National (or regional) GlobalOrganizational form Hierarchical / Bureaucratic Networked/EntrepreneurialKey production factor Labour and Capital Knowledge and innovationImportance of research Moderate CriticalNature of employment Stable Risk and opportunityRegulation Commend and Control Market Orientated Flexibility Kotler, et. al, Think ASEAN P. 49
Changing Business Landscape Traditional Businesses Future BusinessesMarkets National, Overseas subject to tariffs Trading block, free trade zonesScope of Competition National or regional: Protectionist Global, liberalisedOrganisational Structure Hierarchical, bureaucratic, specific Networked, entrepreneurial, scope, localised multidisciplinary, empowermentKey Productivity Factor Labour (skills), capital, in-house Knowledge, innovation, outsourcing, expertise, durability offshoring, time to marketImportance of Research Moderate, imitate and improve Critical, innovate and inventNature of engagement Mandate, relationship, intuition Opportunistic, free trade, due diligenceRegulation/Governance Top down silo, closed group Connected matrix, transparencyStrategic Management Inside out- SWOT-strengths, Outside in – TOWS- threats, weaknesses, opportunities, threats opportunities, weaknesses, strengthsStrategic Marketing 3 Cs – customer, competition, 4 Cs – change, customer, company, 4 Ps – product, place, competition, company PDB triangle – promotion, pricing positioning, differentiation, brandMarketing Focus Product centric distribution Customer centric serviceGrowth Strategy Market share Sustainability Kotler, et. al, Think ASEAN P. 54-55
Value Migrator The New Landscape Configuration Significant forces of change New rules of the game New NewCompetitive New Value Winning New value Customer Propositions Value requirements setting app profile indications indicators F8 + E8 “Total Get” Value = __________ = __________ P + Oe “Total Give”Kotler, et. al, Think ASEAN P. 77 Company Existing competence Risk-attitude Stretch possibility
Regulation SCCP placed lemongrass oil under scrutiny as a cosmetic Trends & Technology ingredient in EU.Alternative technologies to Trends & Technologysteam distillation (CO2) Substitutescan make much smoother Citral (main constituents) can Regulationoil but will increase capital be produced from a number ofneeds greatly. chemical feed stocks.Natural, exotic, organic, Alternative oils (litsea cubeba)FAIRTRADE could cost much less to produce.increase oils popularity (?) Lemon myrtle oil muchif seen as exotic. smoother and acceptable to end users Many alternatives to lemongrass in product formulations. Substitutes Industry Competitors Bargaining Bargaining power of power of buyers suppliers Intensity of Rivalry Competitive Rivalries Bargaining Power of Buyers Currently small item of trade in flavour industry, strong relationships with established producers. Bargaining Power of Suppliers Collecting the most suitable Competitive Rivalries planting material require effort. Lemongrass quick yield and Extraction and straightforward to cultivate and distil harvest .technology needs to be – expect high elasticity of supply acquired or developed from both existing and new Analytical equipment or service producers. maybe expensive/remote. Producers of substitutes very aggressive
Competitors in AsiaScopeGlobal Multinational firms Regional National ChampionsRegional CP, Singapore Telecom Domestic players both large and small – Chinese SMEs, overseas Chinese firms, national companies Local Contextual and Low resource costs political knowhow Technology and Marketing Basis of Competitive Advantage
MNC Development According to Country DevelopmentSourcing Countries Sourcing office Offshore factoriesSouth China ASEAN Integrate into OEM Contracts in export zones global/regional JV with resource rich partnersKey Countries operationsJapanChina Joint ventureTaiwan Acquisition ExpandSouth Korea GreenfieldEmerging CountriesThailand Joint ventures Initiate severalIndonesia representative offices business activities RationalizationMalaysia Distributors multiple presenceIndiaPhilippinesVietnam Agents Establish initialMarketing Countries Representative investment throughMyanmar office JV or local subsidiaryLaos, CambodiaPlatform CountriesSingapore Establish a base to learn, collect Regional officeHong Kong Set up a regional information and for administration office to coordinate efforts set up contracts of synergies Entry Growth Consolidation
Banking & Financial FinanceTypical Evolution of Services Chinese Groups in ASEAN he en d T ld n Property Trade Real Estate o o G am i D Progressive Manufacturing vertical integration in Diversified upstream activities Activities Investment in industrial activities, either Diversified direct or through ActivitiesStart up in Trading joint ventures 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
Ownership of Consumer Durable Goods in China (2002) Units per 100 Units per 100 National Average Households (Rural) households (Urban)Bicycle 121.3 142.7 128.1Motorcycle 28.1 22.2 26.2Car N/A 0.9 N/ARadio Cassette Recorder 20.4 47.9 26.2Colour Television 60.5 126.4 81.2B/W Television 48.1 N/A N/ATelephone 40.8 93.7 57.4Mobile Phone 13.7 62.9 29.2Air conditioner 2.3 44.1 16.2Camera 3.3 44.1 16.2Electric fan 134.3 182.6 149.5Hi-Fi System 9.7 25.2 14.6Refrigerator 14.8 87.4 37.7Video Recorder 3.3 18.4 8.1Washing Machine 31.8 92.8 51.1 China Statistics Handbook 2003
Change in Consumer Differentiation Behaviour in China Yuppie FashionTraditionalism Modernisation Thoughts of Chairman Mao Egalitarianism Lasserre & Schutte, P. 74
Chinese Culture in Flux and Transformation Traditional Values Communist Values Egalitarianism Country Orientation Hierarchy PartyFamily orientation Class Background Societal order Sacrifice Relationships Harmony Seniority Face Saving Emerging Values Less Hierarchical Individualist/Materialist Hero Entrepreneur Here and now orientation More direct communication Lasserre & Schutte, P. 80
Sales Response Function to IncomeSales Marketing Potential Concave Function: Elite Segment S-Curve Function: Traditional Segment S-Curve Function: Transition SegmentLasserre & Schutte, P. 71 Marketing Effort/Time
Differentiated Positioning High Applied to high end segments Emerging Battlefield Price premium Low Cost Low Volume Mass Distribution High costs Differentiated High Tech Strong Brands Large Chinese Companies, (Huawei, TGL), and some Western companies Most Western Competitors Technologyand Marketing Advantages Cost Leadership Positioning applied to high volume low-end segments Advantages based Low Cost Mass distribution on local knowledge only Low Cottage Industries Large Chinese competitors (Kanko, Haier) No Specific cost Based on volume advantages based Cost Advantages and local knowledge on volume Competitive Positioning in China
A Look at the Malaysian Retail Market Channels
Malaysian Retail ManufacturerMarketChannels & Structure National Distributors Wholesalers Super- Sundry Convenience Chinese Hypermarkets markets Stores Stores Medical Halls Consumers
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 AustraliaHyper & 20% 68% 91% 85%Supermarkets(Chain Owned)Independent 20% 2% 2% 10%Hyper &SupermarketsWholesale 57% 10% 2% 3%Trade – Sundry& convenienceStoresOther 3% 20% 5% 2% Convenience Chains
Kedah/Perlis 15% Kelantan/Terengganu 8% Perak 8% East Malaysia 6% Pahang 8% Klang Valley & Central Region (N. Sembilan) 35%Penang 5% Southern Region (Johor & Melaka) Approximate National Market Break-Up 15%
Clear Competitive Context Perceptions of the Clarity of Rules Accessibility of the Asian Pacific Region Political, Singapore Legal, and Hong Kong Ethical Context Taiwan Familiarity Malaysia Japan PhilippineNot Familiar Vietnam Familiar Thailand South Korea India Indonesia China Unclear Lasserre & Schutte, P. 184
Definitely yes Reliability Strategic Market Information the Asian Pacific Region Japan Taiwan Easy to Obtain South Korea Hong Kong Singapore Philippine MalaysiaDefinitely No Definitely yes India Vietnam China Thailand Indonesia Definitely No Lasserre & Schutte, P. 189