Exploration of Changes for Goods Distribution in the ASEAN Following the Implementation of the ASEAN Economic Community

Abstract: Purpose - The purpose of this thesis work is to explore how the fully implemented AEC affects cross-border trade in the ASEAN, and based on the findings determine how multinational companies should adapt their logistics strategy to the change. To achieve this purpose the following research questions will be answered: How will the AEC affect the distribution of goods in the ASEAN? How should a multinational company adapt their logistics strategy to the new conditions? Methodology - To explore the opportunities and threats regarding the fully implementation of AEC, the authors had to complete 4 phases including a pre-study, literature study, case study, and data analysis. The pre-study was about the basics of ASEAN. The Literature study was mainly about Logistics Management, Strategic Management, Contingency Theory, and AEC, and its aim was to find out the key factors affecting logistics strategy and how the AEC affects them. In order to locate what opportunities and threats that arise along the affected factors, a case study was conducted by studying a real-life example on a case company, through interviews and tariff tables. Additionally, data analysis was done throughout the thesis work by structured methods and a PEST analysis. Findings - Literature study showed that the affected factors where tariffs, NTBs, ROO, trade facilitation, customs integration, standards, and TBTs. After analysing how the affected factors will change the business environment by a PEST analysis, the authors found that the most crucial threat is increased competition and the greatest opportunity is in the ease of moving goods and the size of the market. Hence, for a multinational company, the best strategy in this case is a Strategic choice strategy, which is both proactive to the change and somewhat able to influence the business environment. The case study showed that in the current situation, the best economic logistics strategy is through Malaysia, no matter end destination. After the fully implemented AEC, the Free Trade Agreements for each country will be the deciding factor. Implications - This thesis is made in ASEAN for multinational companies who is considering in which ASEAN member country to use as an assembly point for the ASEAN market after the implementation of AEC. For these companies, this study can be a fundamental part of their decision. Research limitations - In this thesis, the affected factors known by literature has been considered when evaluating the consequences of a fully implemented AEC. The case study is including half of the ASEAN members and in a given order. In addition only the external business environment, and more specific the general environment, was taken into consideration. In further studies, a benchmark could be performed in order to find literature unknown factors, all ASEAN members should be included in various combinations of orders, and considering the whole business environment.