- Hey Z, great seeing you. - You too Dae Ryun. - I know you've been coming to Asia for many years. What do you think has been the biggest change in terms of both business and marketing? - Ah, great, that's a good question. So, my association and fascination with Asia really came starting at 1997. The first time I came to Asia was during the height of the Asian financial crisis. I went to teach at Thammasat University and Thammasat University had asked me to teach a class on distribution channels. So, anyway, I signed a contract back in January and when I came in November, the baht had devalued from 25 to the dollar to 47. And, the day I got there, they had held the election in Thailand and they couldn't pick a Prime Minister. So suddleny the had no Prime Minister, the currency is devaluing, all the currencies in the region are devaluing, the have currency controls going on all throughout the region, and I'm staying at my hotel, and it's all of the bankers from the World Bank, or the advisors from the World Bank and all of these people from IMF and they are talking about the bailouts, for Korea, bailouts for Thailand and what they were going to do, and the solutions. So it was really, personally, one of the most amazing times of my life, because here you are talking to people who are talking about the intricacies, the economies, going forward, and what some of the difficulties were and when they would talk about some place like Korea, they were worried about the intermixture and the intermingling of the corporations, so it was all about transparency. - So that was like 20 years ago? - Yeah. - How is it different now? - So how has it changed now? Well, you know, one thing that has really happened out here in Asia is the banks have been cleaned up enough a lot and this has made a lot more transparency in the banking sector throughout the region, especially in places like Thailand. So, if Thailand was my first jumping-off point, the banks have cleaned up their non-performing loans. At the time when I was there, there were over 50% of the loans that were not performing. Today that number is very very low. But, what is also done is it has put great deal more emphasis on the financial sector and some times, to the detriment of the marketing sector. So what I see is that a lot of times, the banks, when they get into a time of a bit of volatility and uncertainty in the marketplace, the banks are cutting liquidity very quickly, because the banks don't want to fall, and the policy makers are very very good with that. Unfortunately, the repercussion is that when the budgets get cramped and when liquidity goes away, people stop investing in sales and marketing. And so what I don't really see is, I see a lot of the brands and the smaller countries that've got cash issues or liquidity issues, having a hard time growing through the recessions. So they take a step backward everytime there is a bit of a recession. - And, what about consumers? How were they like back then? How are they like right now? - So if we just stick with Thailand for a second now. So Thailand was a great growth story. So remember 1997 when I got there, it was fastest performing economy in the world over the past 12 years and it had grown at a compound average growth rate of over 10%. Now, that was kind of new still to the Thai consumer. Well, now if we fast forward ahead another 17 years, It has kind of been 30 years of growth. And if I look at ASEAN, ASEAN over the last 30 years, every 5 year period, ASEAN has grown at more than 5% compound growth rate for those 5 year periods. Well, now you've got a consumer that doesn't remember the days of hunger right? There are much more secure consumers, they have a great deal more expectation, you know, both expectations about what the society will provide as well as that tomorrow will be an okay day. - So their willingness to spend has increased. - Yeah. - So what kinds of products are we talking about? - Well I think we have seen a lot more luxury, right? As people have moved up the consumption ladder. They've been looking for brands from arround the world, and also what has happened is a lot of these countries are developing their own home grown luxury brands now, right? So I live here in Singapore and you see some of the brands like the Shanghai Tangs and if we go up to Thailand, people like Flynow, or Jaspal, they're creating their own brands that are now starting to try to take internationally. - So there is much more pride in buying Asian brands? - Yeah. I mean, look to the new rich. They still wanna buy those products from abroad right? That's a symbol that they've stepped up and stepped into a new class. On the other hand, yeah, I think the Thais who have been wealthy for a period of time are now starting to go back and say, you know what? I can be a style setter, I can be a trend setter, I can buy our own brands. So they are starting to take a look at the Thai brands. - Okay, let me ask you about multinationals here in Asia. Has their attitude, their approach to marketing to these countries changed? - You know, I believe there is a bit of a learning curve that multinationals always go through. So, when a multinational starts out, they go to a place like Thailand or they go to a place like Indonesia, and they say, okay, we're a Dutch company, this used to be one of our protectorates, So we'll just go in there and then what we'll do is we'll try to sell some of our product because we're a Dutch company and that's an old Dutch colony. And they do okay, right? They get the low hanging fruit, there's a lot of expats still living out there, and those people have a bit of influence, they're seen as high performers in society, so they do fairly well. But it begins to plateau, right, and then what happens is the company has to take a real re-look at themselves and ask themselves whether they're really committed to these markets or not. So let me give you an example of this. Okay, and I think one of the most dramatic examples, we wrote about this in our journal, Asian Management Insights, that we published. What happened was, is Kraft did this. And so Kraft went into the Philippines. Now, the Philippines has always had a very strong relationship with America. America's had military bases out there. And so when they walked into that market, they picked up some low hanging fruit, and they just sold what they sold back in the United States, right? They didn't modify anything, nothing was changed, but they did pretty well. Then all of the sudden here recently, the Philippino economy has started to grow again. Here's the economy ticking off and it's growing, but they're looking and they're saying, well, why aren't our sales growing? We're growing 2, 3%, but the economy's growing 6 or 7. Given that we're an upmarket brand we should be doing better than that, right? Well, what they did at Kraft, which was really interesting, is they took everybody in the Philippines office and said, you're now in market research. So whether you work in manufacturing, whether you work in marketing, they said, we don't want desk market research people. And they pushed them all out in the field. And then they came back. Now, all of a sudden, what happened? All of the people from the plant, all of the people from manufacturing, all of the people, they started to design things and they started to realize that hey look, the average Korean, or excuse me, the average Philippino who's living on $400 year or $500 a year, they can't buy this product, and they can't buy it in the size, and they don't have the refrigeration or the storage or the air conditioning. And it sits in a sorry, sorry shop, which are the little mom and pop shops that are, and what they realized is they had to reconfigure their products, they had to resize their products, They had to make different textures, different tastes, and then all of a sudden, what happened? Well, they began to grow, because they made the modifications. They adapted to the marketplace. And I think this is the thing, Dorian, that I think that, I watch with the successful multinationals, okay. Is that you're gonna have success early on. There's enough people that are world traveled, they'll buy your products, and if you just wanna sell some product in the short run you'll do okay. But to really succeed in these markets, and to thrive in, not just survive, but thrive 10 years in, 20 years in, 25 years in, you're really gonna have to make some commitments to the market. And now what I'm seeing is more and more multinationals are bringing innovation teams and development teams out here. So here I am in Singapore, and this is where Unilever's built their new corporate training offices. This is where they put their new innovation center. Because they recognize, if we're going to succeed in Asia, which is where 60% of the world's population is, we have to Asianize, we have to be in touch with Asia. So, what am I seeing with the multinationals, is the ones who get it, go through this learning curve and they make this journey into really adapting to the local marketplace and learning how to harvest that local marketplace. - Do you see accross Asia sort of a pan-Asian kind of strategy sometimes working? Or does it always have to be localized to the individual country? Yeah, well you know, I mean there's certainly always going to be opportunities for localization if you really know that local economy and certainly sometimes local partners who have influenence or certain assets in the marketplace make it easy for you to localize. But I think the thing that I'm seeing now is with AEC, the Asian Economic Cooperation. What's happening is things are coming together and what we are seeing is a tremendous ammount of cross-border investment going on, we're seeing more and more mergers and acquisitions, taking place, you know, the cross-border mergers and acquisitions on ASEAN last year were above anybody else in the world. And so what you're seeing is that people are starting to look at the region and say look, we need to be in the region. They're developing greater startegies for the region. And you know, I was talking to the author a book called Rediscovering the Silk Road, who at our discussion said to me If an Indian firm invests over in China, they should be investing in China not with the idea that this is a Chinese investment, but that it's a global investment. And then they're investing globally, this is just part of the strategy that happens to take place in China. And I think I've seen more and more of that. And, as we see borders come down here with the AEC, the work forces are going to be able to move around a lot more. So I think what you're gonna see is more blending of policies and strategies. - Do you see an opportunity for cross-border business and marketing? - Yeah, absolutely. - Is this true for brands also? - I think that's very much the case, and we could see it. I look at brands here in Singapore, things like The Coffee Bean, or things like BreadTalk, they're going all troughout the region now and they're being accepted as they move around the region. Similarly we see Korean brands down here and Japanese brands in our markets down here in Singapore, and they're doing quite well. - Okay, Thank you so much Z. - That's it? Okay. Thank you so much.
