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Market Analysis of Thailand

Discuss about the International Business Capstone for Sharp Motors.

The purpose of this report is to provide a brief view about the market expansion activities of the Japanese company Sharp Motors. The company is a Japanese car manufacturer company producing cars the market of Japan. Sharp was originated in the year 1970 in Nagoya, Japan. Japan is the place where major manufacturing activities of the company are conducted including production of cars. Further, the company decided to cut the cost of production and expand their business (inaugurate manufacturing plant) in the Asian market. The company identified Thailand as a potential market that can help them to expand their sales and earn optimum revenue.

Further, the below mentioned report provides market analysis of Thailand that can help the company to sustain its growth. Further, the report also discusses about the PESTEL analysis and porter’s National Competitive Advantage that can help the company to adequately analyse the market conditions and grow. The latter part of the report provides information about the advantages and the disadvantages that the company would receive by expanding the automobile market of Thailand. The recommendations provide extent of feasibility to which it is profitable for the company Sharp motors to expand their manufacturing unit in the automobile industry of Thailand.

The automotive industry of Thailand is the largest industry of Southeast Asia. This industry of Thailand ranks 12th position in the world in terms of revenue. So, it should be noted that the market is very profitable for a good automotive company to enter and initiate sales. This industry of Thailand has an annual output of serving nearly 2 million vehicles to the people worldwide. Toyota Company has a major share in the Thailand’s automotive manufacturing activities. Further carmakers in Thailand produced a total of 1,915,420 cars and commercial vehicles in 2015 (Oxford Business Group 2018). The domestic market of Thailand is very volatile as major companies present in this industry aims to export their products so as to gain optimum revenue. The market hit an unstable growth as the carmakers are focusing more on export due to which the domestic demand is unable to meet up to the domestic supply (Warr 2017).

Further, this unstable growth of the market was covered by the buyer’s incentive program under which the domestic demand was captured by the domestic companies providing them efficient revenue as well. Subsequently, the Thailand’s board of investment also started providing subsidies to the eco-cars that raised the sales in the market by providing revenue to the companies as well. A notable fact is that the Thai companies gain the advantage of ASEAN Free Trade Area, due to which they trade out of Thailand and earn revenue. Thailand has the biggest market for pickup trucks with over fifty percent of market share for one ton truck. There is adequate availability of technology and raw material that provides an ease to the company to manufacture their products and initiate sales as well (Barnes, Black, and Techakanont 2017).

PESTEL Analysis

The PESTEL analysis provides in depth analysis of the market in which the company Sharp motors is going to enter. Further, PESTEL analysis of Thailand is discussed below:

The country Thailand is a constitutional monarchy which is now switched between the military junta and parliamentary democracy. The country has now become an industrialized country by exporting goods produced in Thailand. However, the political system of the country is unstable that raises question on the activities of the companies. Further, there is a risk for the investors as the political system of the country acts as a barrier in many case of growth.

 The country ranks on 27th position in world’s economy and second largest in ASEAN. The economy of the country is dominated by service sector that contributed approximately 55.9% to the overall GDP of the country (Gupta 2018). The GDP of the country in the year 2016 was 5,907.91 USD and the GDP per capita according to PPP in Thailand was 15681.80 USD in 2016. There is high FDI in the country that reduces the level of unemployment as well (Trading Economics 2018).

The people of the country follow the culture of Buddhism; it is the main predominated religion present in the country. The country has population of 6.89 crores people. This country is also considered as second world country.

There high degree of internet users present in the company. With this effect it should be noted that the country uses technology to optimum level that brings innovation in use in various companies. Large scale companies present in the country aim to use information technology available with them to gain customer satisfaction. Thailand is Asia’s leading manufacturing hub.

Water pollution is one of the biggest issues attracted with the growth of Thailand. Nevertheless, the environment of the country is suitable for people to live in. The country has strong policies for environmental issues. The country present in the industry wisely uses the resources to save them for the future generation. The country has also implemented 20 year plan for the Enhancement and Conservation of National Environment Quality and steady grow of environment (Kuroiwa, and Techakanont 2017).

The legal system of the country is a combination of the traditional as well as western Thai laws. The government of the country holds a liberal attitude towards the international trade activities in the country. The country has also maintained relationships with the WTO (World Trade Organization) and ASEAN (Association of Southeast Asian nations) nations so as to reduce the tariffs, and duties related to the export (Ng, Hamid, and Yusof 2017). 

Porter's National Competitive Advantage

This theory is again an important theory that helps in understanding the nation’s condition for doing business. It is sometimes also referred to as the diamond model for the business. For Thailand’s car manufacturing sector this theory is illustrated below:

This company has adopted various types of strategy for their business. These strategies will be designed as per the competitor’s strategy for the market. Two major strategies that it can adopt for the Thailand market are Product Differentiation and market Development. They can utilize both these strategies for penetrating inside Thailand as both of them aims to fulfill the demands of the people which others fail to do. Structure of the company is hierarchical where there are several functional units present at different levels (Wonglimpiyarat 2018). The major rivals of the company includes Toyota, Auto alliance (Mazda and Ford), general motors, BMW manufacturing, Nissan Motors, TATA motors, Mercedes-Benz Thailand, Suzuki motors, Volvo cars etc.

Thailand is an emerging country hence there is lot of potential for this company to sell their. Since the demand of the cars is going to increase in the coming years. But the more important fact is that production unit at this place can helping fulfilling the demands of South Asian market which is very large. This region is expected to be the largest consumer of automobile products in the coming years since they have very diverse economic backgrounds of people hence they also demand of cars of various price ranges (Rothaermel 2015).

Due to presence of much larger players in the industry, There are large numbers of suppliers present hence the supporting industries are in huge numbers and providing raw materials at lower cost. The glass and steel industry of Thailand is very good. Both are the biggest supporter industries of Automobile sector.

Factor conditions

The factor conditions are very helpful for the company. This can be understood by the following points:

  • Skilled labors: There is highly skilled labor force present inside the nation. In the last few decades with the entrance of new manufacturing sector firms in Thailand, the availability of highly skilled employees have increased.
  • Material Resources: There is easy availability of raw material especially glass, steel and plastic as well knowledge resources are also present in huge numbers (Riasi 2015).
  • Deregulation of labor market: There is deregulation of the labor market which will help in ensuring high level of growth. It will help in enduring stronger precautionary savings.
  • Liquidity of national stock markets: There is a lot of instability noticed in the capital market of Thailand. This can be a challenge for the company.

There are many kinds of advantages and disadvantages of expanding in Thailand.

Advantages:

  • Highly skilled, cheap and knowledgeable laborers are present in the Thailand.
  • Since the excise duty on the export from Thailand is very low hence companies usually focus on manufacturing in Thailand and export it. This leaves the vacancy for satisfying the local market which cited firm can capitalize upon (Law 2017).
  • Trade policies and other government policies also support the manufacturing sector within the nation.
  • Stronger supply and demand network which help in doing effective business. This also helps in fulfilling the demands of the market (Lazzarini 2015).
  • Production technology inside Thailand is very good along with the availability high quality resources.
  • Easy reach to the neighboring markets like India and China the consumption is very high.
  • A company can own 100% share in the business and can take out whenever required.

Disadvantages:

  • The stability of the market has been a challenge over the years as the stock markets have seen a downfall in the past.
  • Excessive competition in the Automobile sector is present and some of them have a market size that is capable of changing the trends in the market (Somsuk, Wonglimpiyarat, and Laosirihongthong 2012).
  • Lesser in-house demand of Automobile in the country. This may also be due to the reason that the per capita income of the nation is on lower side.
  • It is a developing nation and hence a bit poorer infrastructure is present.
  • In the ease of doing business it stands on the 17th spot.
  • Higher corporate taxes i.e. up to 30% on the net profit.
  • Thailand’s culture is different from that of the culture that is present in Sharp motors (Jones, and Pimdee 2016).

Recommendation and Conclusion

On analyzing the market condition of Automobile sector in Thailand several things can be recommended for the Sharp motors regarding their expansion plan in this nation. The first and foremost thing that it must consider is that there is a section of market in the Thailand Itself who demands goes unnoticed as most of the rivals focuses on export of the products. Second is that they must hire local staffs so as to understand the social and cultural aspect of the Thailand. Third recommendation in this regards is the fact that company must rely on the Jpanese technology for production as it is more advanced as compared to Thailand’s market. They also need to adopt the same quality standards as they have adopted in parent nation. Apart from this it is also crucial that a thorough training plan must be made by the company for itself. This will help them in implementation of the expansion strategy at much faster rate. Company must stick with their strategies like product differentiation so as to fulfill the demands of larger market section. In the amount of competition that is present in the Thailand market without having larger product range it will not be easier for the company to make their mark in the industry. Since this country allows 100% ownership for foreign companies hence sharp must also enter the country on their own basis (Intarakumnerd 2017).

Advantages and Disadvantages

From the above report it can be concluded that Thailand market is an excellent place for doing business especially in regards to the automobile industry. Companies like Sharp motors have an excellent opportunity to expand in this market. This is illustrated by the fact that many Japanese companies have already expanded in this market and is doing excellent business. It comes in the ASEAN free trade regions and hence no excise duty is imposed on the export facilities. These successes can be attributed because of many favorable opportunities in the market. Various external factors are supporting the manufacturing companies within Thailand. The availability of skilled labors, excellent distribution network, and larger number of suppliers, advanced production technology are some of the factors that works in favor of companies expansion plan in Thailand. It is at 17th position in the ease of doing business hence acts as a very good place for doing productions.

References

Barnes, J., Black, A. and Techakanont, K., 2017. Industrial Policy, Multinational Strategy and Domestic Capability: A Comparative Analysis of the Development of South Africa’s and Thailand’s Automotive Industries. The European Journal of Development Research, 29(1), pp.37-53.

CIA., 2018. World Factbook Title [online]. Available at https://www.cia.gov/library/publications/the-world-factbook/geos/th.html Accessed on 30 April 2018.

Gupta, A., 2018. More Japanese Automotive Companies To Use Thailand As Manufacturing Base [online]. Available at < https://www.thailand-business-news.com/corporate/52682-japanese-automotive-companies-use-thailand-manufacturing-base.html> Accessed on 30 April 2018.

Intarakumnerd, P., 2017. Thai automotive industry: International trade, production networks, and technological capability development. In Production Networks in Southeast Asia (pp. 161-182). Routledge.

Jones, C. and Pimdee, P., 2016. Innovative ideas: Thailand 4.0 and the fourth industrial revolution. Asian International Journal of Social Sciences, 17(1), pp.4-35.

Kuroiwa, I. and Techakanont, K., 2017. Formation of Automotive Manufacturing Clusters in Thailand (No. DP-2016-32).

Law, C.M., 2017. Restructuring the global automobile industry(Vol. 4). Taylor & Francis.

Lazzarini, S.G., 2015. Strategizing by the government: Can industrial policy create firm?level competitive advantage?. Strategic Management Journal, 36(1), pp.97-112.

Ng, S.C., Hamid, N.A.A. and Yusof, S.R.M., 2017, June. Green Manufacturing Performance Measure for Automobile Manufacturers. In Industrial Engineering, Management Science and Application (ICIMSA), 2017 International Conference on (pp. 1-5). IEEE.

Oxford Business Group., 2018. Thailand's automobile industry sees rise in production [online]. Available at < https://oxfordbusinessgroup.com/analysis/smooth-drive-automobile-industry-sees-production-growth-while-domestic-sales-have-been-volatile> Accessed on 30 April 2018.

Riasi, A., 2015. Competitive advantages of shadow banking industry: An analysis using Porter diamond model. Business Management and Strategy, 6(2), pp.15-27.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Somsuk, N., Wonglimpiyarat, J. and Laosirihongthong, T., 2012. Technology business incubators and industrial development: resource-based view. Industrial Management & Data Systems, 112(2), pp.245-267.

Trading Economics., 2018. Thailand GDP per capita PPP [online]. Available at < https://tradingeconomics.com/thailand/gdp-per-capita-ppp> Accessed on 30 April 2018.

Warr, P., 2017. Thailand’s Automotive Manufacturing Corridor.

Wonglimpiyarat, J., 2018. The pursuit of original equipment manufacturer strategy: insights from an Asian country. R&D Management, 48(2), pp.243-252.

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