Sunday, September 28, 2014

Aegis's controversial ad: a classic case of repositioning Malaysia vs Philippines as business hub

A few days ago, a controversy erupted when Aegis showed a video showing why Malaysia is a better destination for investments compared to Philippines.  Here are the points summarized in the news:
  • The advertisement, which runs less than 3 minutes, promoted Malaysia as a “preferred alternate to the Philippines and is fast emerging as the ultimate investment destination for multinationals."...It also alluded to the Philippines as an economy with inadequate infrastructure, a difficult bureaucracy and costly business processes – in contrast to Malaysia which the video says “is investor-friendly owing to flexible policies of the government.” (Rappler)
  • The video, which ran for nearly three minutes, explains why Malaysia is a better investment site than the Philippines, citing “stable governance,” better security, and a good tropical climate. Unlike the Philippines, which is situated in the Pacific "ring of fire,” the video noted Malaysia is not frequented by natural disasters, like typhoons, which disrupts business and affects interactions with global clients. (GMA)
  • The advertisement promotes Malaysia as a business hub in contrast to the Philippines, which it described as a problematic business environment. The video described the Philippines as having "inadequate infrastructure," an "unfriendly climate," "less security," and lack of government support. The video also calls attention to the country's geographic location while listing down the some of the major typhoons that the country has experienced in the past decade and saying that being in the Pacific ring of fire makes businesses unstable. (Adobo)
Let's summarize these into four points:
  • Adequate infrastructure vs Inadequate infrastructure 
  • stable governance and government policies vs costly business processes and unstable government
  • Secure online transactions vs insecure online data
  • Good tropical climate vs typhoon prone country in the pacific ring of fire
(Update: a friend sent me a link to the ad.)


A.  Classic Case in Positioning

In their classic book, Positioning: The Battle for Your Mind, authors Al Ries and Jack Trout showed that the mind positions different products in different rungs of a ladder.  The top most rung is occupied by the market leader, the rung below is occupied by the next leader, and so on.  The only way for one brand to go up in the ladder is by repositioning the competition by changing the ladder, so to speak, and rearranging the rungs in this new ladder according to the new framework.

What the Aegis ad did was to define the meaning of "good business hub".  What does this phrase really mean in the national context?  Aegis ad defined "good business hub" using four parameters: adequate infrastructure, flexible government policies, better national security, and less prone to natural disasters.

What the Aegis ad did is similar to what Samsung ads are doing to Apple: Samsung repositioned the iPhone by redefining the meaning of a "good mobile phone".  Samsung defined this phrase as long battery life and unbendable:

B. Will the Repositioning Stick?

The repositioning will only stick if it is based on truth and if this truth is highly valued by customers.  Even if the iPhone can be shown to have short battery life and bendable, these truths may not sway customers from buying the iPhone if they value more what the iPhone can offer, such as smooth and integrated user experience from the company who makes both the phone and the operating system compared to Samsung, for example, who makes their phones to accommodate Google's Android OS.

Will Aegis's repositiong of Philippines vs Malaysia as business hub stick?  To answer this, we need to determine if there is a truth to the assertions to the problems in Philippine business climate and whether these truths are valued by the companies who invest in the Philippines.

Let's first take a look at the assertions to see if they are true:
  • Philippines has inadequate infrastructure.  Let's cite one case: cargo transport from port to business sites.  The Philippines failed here because our ports are now clogged with goods which can't be shipped.  Other ports such as Batangas were not used for international shipment that would be closer to Cavite Industrial Parks.  Also, there is no railway system that would allow shipment of goods in Mindanao ports direct to Cavite faster.  What we have now are slow RORO (Roll-In-Roll-Off) system.  
  • Philippines has a difficult bureaucracy.  When Manila decides to implement the truck ban, the shipment of cargo from the Port of Manila were affected.  Also, when Typhoon Yolanda struck, the government became helpless.  The national government can't coordinate with the local government because the President is an Aquino and the Mayor is a Romualdez.
  • Philippines has worse security problem.  The ad referred to cyber security than to insurgency.  The image of Philippines as home of hackers may be due to prominence of some Filipino hackers, such as the makers of the ILOVEYOU virus, which became the record holder for the most destructive virus in 2002. There is no strong insurgency problem in Malaysia than what we have now in the Philippines.  We have the Communist NPA's and the separatist MNLF and MILF.  Even if the Philippines can agree on the Bangsamoro deal, that would only solve the MILF problem, but not the MNLF.  There will still be no peace in Mindanao.  And there is still the NPA, who burn infrastructure of businesses (e.g. Globe) which do not pay the revolutionary tax whose.  Worse, the sympathizers and funders of the communist movement now occupy the halls of Congress and Senate.
  • Philippines is a disaster-prone country.  The other ASEAN countries have to thank us: before typhoon hits them, they usually hit Philippines first and each landfall weakens the typhoon.  We are also along the seismic ring of fire, so that earthquakes are natural to us.  These two calamities actually make the Philippines the premier observatory of natural disasters, and that is why the Jesuits founded Manila Observatory: to observe disasters such as typhoons and earthquakes.
So it appears that the assertions of the Aegis's ad are true.  

Our next question is: are these truths considered by investors as most important in making business decisions to invest in the Philippines?  

If investors haven't noted these problems before and they invested in the Philippines, then they may withdraw their investments and go to Malaysia.  But if they already know all these risks, yet still thinks to invest in Philippines because of greater value that the Philippines has to offer, so that the potential for profit would greatly overcome the costs posed by risks, then the problem of the Philippine government then is to determine this greater values by interviewing each investor for their reasons for investing in the Philippines.  These interviews are important, because the government can then invest to protect these perceived values, e.g. highly trained English speaking workforce.

C. The Philippines as a Brand: Counting the design wins like Intel

Well, we can whine and dine and paint a sorry picture of us as victims--poor Filipinos who are always the underdog.  The other option is to take the proactive stance and consider the Philippines as a brand and the investors as customers.  The Department of Tourism has rolled out its "It's more fun in the Philippines" tagline and the branding caught on, at least as measured from its virality in social media like Facebook.  But this branding is just for tourists and not for investors.  The question now is this: how do we make investing more fun in the Philippines?  

Perhaps Philippines can learn lessons from Intel, as narrated by Michael S. Malone in his book, The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company .  In 1979, Motorola and Zilog challenged the dominance of Intel's 8086 processor:
The 8086 rocked the semiconductor world on its heels, but not for long.  The semiconductor industry had been a brutally competitive free-for-all now for almost two decades--and any compayny that couldn't claw its way back from such a blow was probably long dead.  And though Motorola had reeled, within six months it had counterattacked with its own 16-bit microprocessor, the Model 68000.  Any doubts that Motorola was too big and old to be a scrapper anymore instantly evaporated: the 68000 was a masterpiece, one of the greatest microporcessors ever designed....Motorala simply designed a processor that featured the best of the 8086's features and improved on the worst.... (Intel Trinity, p. 200)
Worse, Motorola wasn't alone: there were rumors in the trade press that another competitor, Zilog, was racing to complete its own 16-bit processor, the Z8000. And with Federico Faggin, the scientist who had led the invention of the microprocessor at Intel, now at the helm of Zilog, no one doubted that the Z8000, too, would be better than the 8086. (Intel Trinity, p. 201)

And this is what Intel found out:
To answer it, the team spent a day just on competitor analysis.  What was it that really made the Motorola and Zilog microprocessors better?  In the end, the team concluded that while the hardware design of the two competitors' chips was a little bit better than the 8086 in terms of speed and processing power, those advantages were not decisive in the minds of the most potential customers.  Rather, the real advantage held by the 68000 and the Z8000 was with a comparatively small but very prominent subset ofusers: "software-oriented" companies--that is, enterprises that focused on user solutions rather than hardware. (Intel Trinity, p. 203)
Besides its image, what products and services did Intel have that made the 8086 a better solution for nervous customers than its competitors?  This led to a second list, this one of the product advantages.  It included the fact that Intel was a company of specialists--the entire company was devoted to the world of microprocessors--not generalists making everything from memory to car radios, like Motorola.  Better yet, with the 8086, Intel was offering a more complete package of supporting chips, including a math coprocessor--Zilog didn't have them, and Motorola's weren't nearly as good.  Intel also offered its customers a collection of tools specifically designed to help them design products around its microprocessors.  The best of these, the Intellec in-circuit emulators, would later be recognized as the first proto-personal computers.  Tellingly, Intel had been so focused upon using these systems to help customers that it never considered putting a display on the boxes and making them into consumer products.
By Friday, it was becoming clear to the team that it really did have a response to the Motorola challenge, that it could create a wholly new "product" merely out of the other products and services that Intel already had on hand, once they were combined into an overarching solution.  They even had a bold, in-your-face, name for this new initiative: Operation crush. (Intel Trinity, pp. 208-209) 
What Intel did next was brand building by content marketing:
It wasn't just the sales force that mobilized: "Numerous committees were created to work out the details.  New sales aids were created to reflect a system, rather than a product, viewpoint.  System-level benchmarks were prepared; technical articles were written; existing customers were convinced to write their own articles; new data sheets were prepared, as was--remarkably given the short time window--a completely new product catalog. [Regis] McKenna devised a new advertising campaign.  Within the next few months, more than fifty customer seminars were presented throughout the world, as was a users' conference.  In each case, whatever didn't work was abandoned and something new tried."
Intel, born in the belief that superior technology would overcome any obstacle to success was now discovering the value of marketing and branding.  It would be a crucial lesson. (Intel Trinity, p. 208)
So the challenge for the Philippine government and business is this: can the Philippines list 2,000 design wins over Malaysia, so that Philippines would provide a better investment package in the minds of the investors? If the Philippines can list these down, then Philippines would have to market itself to the world by producing technical data specifications and creative content in all media--websites, blogs, Twitter, Facebook, Linkedin, Pinterest, Google+, You Tube, and many more.  It is high time for Philippines to market and brand itself as the premier investment destination in Southeast Asia.


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