SMU_AMI_November_Spread

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Economic integration and free trade is not always a panacea for businesses. By Philip Zerrillo Markets: r bane for marketers? Many prognosticators and pundits have extolled the virtues and concerns of the impending ASEAN Economic Community (AEC). The blending of markets and the reduction of trade and entry barriers are being hailed for bringing long-term competitiveness and attracting foreign investment into a fast-growing market of over 600 million consumers. For policymakers, a common market helps lower prices over the long run, which in turn benefits consumers. On the flip side though, the coming together of the AEC brings about a series of fundamental changes in the nature of competition at the firm level. The reduction of tariffs and the hypothetical free flow of goods and services across borders will certainly open up opportunities, but equally, will inevitably change the competitive dynamics of many industries. Much of this competition will be felt in the marketing function, particularly in the distribution sector, and will lead to radically changed roles for marketers. Economic theory would imply that market homogenisation would simplify the marketing function as a potentially large market size should mean that marketers would be able to sell large quantities of their products, thereby benefiting from economies of scale—however, this is a rather simplistic description. In reality, the coming together of ASEAN economies will strip the marketing function of one of its most important levers—the ability to price discriminate across markets. Pricing is a key tool in the marketer’s arsenal as it allows them to customise prices to regional and local market conditions, in this manner extracting the maximum value for their products and services across markets and geographies. It also enables marketers to use prices to adjust supply levels to changes in demand, thereby optimising manufacturing and delivery scale. Moreover, marketers often use incremental cost plus pricing as a means to achieve efficiencies and enter new markets, as prices are set according to what each market will bear. But an integrated market takes away this ability to differentiate the product through price discrimination. This may not only lower the price, but also sets the stage for severe price competition if the company chooses to continue using price as the basis of competition, or continues to allow different levels of the channel the latitude to set prices. Businesses would then have to find other ways to differentiate their product offerings to their customers—which makes the task of marketers far more difficult and complicated.
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Page 6 and 7: 4 FROM THE EDITOR From smart drones
Page 8 and 9: At the Helm Humility and compassion
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Page 12 and 13: INDUSTRY WATCH Transforming the tra
Page 14 and 15: 12 Traditional retailers versus org
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Page 18 and 19: 16 of information asymmetry. As can
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