Are you getting ready for the 2015 AEC?

The Southeast Asia markets have reached the point of almost tipping, and in the coming years the ASEAN Economic Community (AEC) will take affect to form a single market and production base with free flow of goods, services, investment, and skilled labours.

According to a report released by JWT Asia Pacific and A.T. Kearney, companies that do not start creating regional game plans, mapping out M&A strategies and start investing more in branding will risk falling off the grid amongst its competitors.

Chua Soon Ghee, Southeast Asia managing partner at A.T. Kearny, said that Southeast Asian companies that map out a regional strategy now and start investing in building solid brands are poised to emerge as winners in the AEC.

“Those that don’t have a regional game plan risk becoming their competitor’s lunch.”

By 2020, the ASEAN’s population is projected to reach more than 650 million people with half being under the age of 30. Add ten more years to the equation and 51% of the population will be in the middle class, according to the Brookings Institute.

Timely strategies

Out of the 50 leaders that JWT together with A.T. Kearney surveyed and interviewed said that the impending AEC is high on their radar. Sixty-four percent of the organisations plan on entering new markets within the region once the AEC kicks in. Four in 10 companies are considering M&A as the method to expand quickly and penetrate into the market before its competitors.

However, a good majority of the CEOs that participated in the study said there’s a “need for scale to deal with more intense competitions” as the main reason for increased M&A activities. In addition, 60% of executes will tackle AEC by expanding their current portfolio of brands and products, with 24% to create new brands and products after 2015 in order to reach more consumers.

Carving a place in tomorrow, today

Southeast Asia is rapidly advancing and with it, the companies in the region are also growing at an accelerated pace. The time for companies to take this opportunity to carve a place in the future has never been more critical.

However, to simply expand is not enough. Companies need to start planning now so that they can make tactical moves that will put them ahead of the curve as the AEC integration is established. Strong strategies that include M&A, conducting proper due diligence and establishing a post-merger plan need to be in place.

Regional brands also need to consider the mass production and low-cost of goods that domestic brands are able to provide. Nearly 40% of the companies with annual revenue under $100 million conceded that their top-selling products does not have a clear brand image or any sort of brand idea.

JWT’s Southeast Asia CEO, Bob Hekkelman said, “Companies have to make the switch from manufacturing products to selling brands. The region’s consumers are moving fast into the middle class and are much more sophisticated in terms of what they buy and what they expect.”

“It’s time to get out of the commodity game, move up the value curve and form long-term relationships with consumers through brands.”

Top 10 prep till 2015

Through this practice, JWT and A.T. Kearny suggest Southeast Asian companies that want to leverage the AEC to:

  1. Recognise the larger market – ASEAN countries have more than $2 trillion GDP, making it the fifth largest market in the world.
  2. Appreciate and embrace change – even if the AEC does not come into play by 2015, the ASEAN market is already committed to freer trade.
  3. Understand that regional champions will rule – your competitors are on a prowl; solid brands with regional reach will be in the best position to grab a dominant share of the new market.
  4. Prepare a regional game plan – it’s all in the details. A new market means make new, complex choices.
  5. Increase scale through M&A - integration will occur; build scale through M&A by adopting a methodical approach.
  6. Build marketing muscles – become more savvy and sophisticated through marketing and branding.
  7. Move up the value chain – have a clear brand identity/idea, ASEAN consumers are spending more on higher value items not because they are premium, but because they have value.
  8. Take a page from the winner’s book – see what big global and regional brands are doing and invest on more brand communications.
  9. Don’t get lost in translation – approach product innovation and brand development with a wider perspective.
  10. Set the world as the final goal – forward thinking players will have a strong foothold on the global market.

JWT  is a marketing communication brand, headquartered in New York and comprises of more than 200 offices in over 90 countries. JWT opened up its first APAC office in 1929 and now has more than 3,800 spread across 18 countries within the region.

A.T. Kearney is global team of forward-thinkers, collaborating with partners to deliver immediate results and long-term transformative advantage to clients. It owns 57 offices in major business centres in 39 countries with over 2,000 consultants worldwide.