You are asked to undertake a country potential analysis on one of these markets and produce a report. Your report should include a detailed analysis of the selected country and should identify the advantages and disadvantages and disadvantages for shop motors entering that market for production.
Introduction to the Thailand economy
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Thailand has been considered as a newly reformed industrialized nation whose economic perception has adjusted the sustenance for accumulating improved economic conditions in the recent years within the global platform. The country has sufficient trade operations with WTO, APEC, IOR-ARC and other ASEAN organizations and has been ranked as 28th nominal and 20th PPP considering the gross domestic products. Apart from this the GDP of the country has been figured at 11.375 trillion baht in the financial year 2012 but it has been increased to 13.5 trillion baht which is next to 406.84 billion Dollars in the financial year 2016. Thus the country has increased its GDP growth from 2.9 % to 4.2% in the year 2018. The country has progressed in the industrial sector and strong focus on the services sector has been assumed. The chief industries has been considered to be automobiles and different automotive parts comprising 11% of the total industrial sector along with financial services which is 9% of the total industrial sector and 8% on the electronics and also tourism sector.
Global market opportunity for Thailand
Thailand has maintained an open marker orientation for pertaining business and has encouraged the foreign direct investment through capitalizing the means through making proper promotions regarding the economic development as well as employment along with transfer of technology. Avoiding dependence on a single country, this nation has welcome investment from entire countries and thus different US based multinational companies have been successfully invested within the country. Thus the consumers of Thailand has created the opportunity for encountering new sales for different medical products automotive accessories, equipments for agricultural purpose, different supplements of foods with outdoor recreational equipments along with franchising and also different educational services. Thus the country has specified its actions with respect to the global automobile market. The government of the country has undertaken certain policies and actions which helped the automobile industry of the country to join hands with foreign automobile players. The government of the country has undertaken certain policies and actions which have made easy exports and procure materials from the neighbouring countries. Besides, foreign players are encouraged to enter the market. By 2030 Thailand would be able to capture much automobile accessories and automobile market of different countries.
Features of the Automobile industry and the structure of it in Thailand
The automotive industry within teh country Thailand has encountered booming business and has contributed 8% to the GDP by producing more than 2 million cars on an annual average by putting the country ahead regarding many other European nations that manufactures car. It has bene observed that the country has been evolved to be the largest exporter for bcoming a car producer because of enabling the policies and promotions regarding the trade deficiet faced by the country at the beginning of 1970. The Thai government has promoted the local production mechanism along with installation of import taxes that are upto 150% on teh respective vehicles that are built in other nations. Forbidding importations are also sustained in the year 1970 but the aspects of and inducements of higher investments by Japanese has ensured improvement in the local car manufacturing industry. Therefore, corporate strategies are adopted by the firm relating to the global concepts and opportunities. If Sharp motors have an aim to set up a manufacturing plant in Thailand, it would have to go through the features of the Thailand economy and the business environment of the country and the features of the automobile industry. The features of the automobile industry and the business environment can be assessed with the help of the Porters national competitive advantage theory. According to Michael Porter the factors that can help the Sharp Motors to get a competitive advantage from entering Thailand are:
Factor conditions- As stated by Porter (2011), factor conditions involve various factors of production like land, skilled labour, availability of resources and the entrepreneurial knowledge. In order to set up a manufacturing plant in Thailand, the Sharp motors will have to look upon the availability of the resources of the country. For instance, direct manufacturing requires huge quantity of skilled labour. Thailand has a large amount of skilled labour. The labour participation rate is higher and it has been ascertained that 39.41 million labours are continued operations as skilled labour. The labour statistics has stated that cheap labour is easily available in Thailand which would help sharp motors to hire a huge amount of labour for the manufacturing plant in Thailand. In addition to this, the Sharp motors should look for the availability of space which is very necessary for manufacturing automobiles. Along with this, the availability of resources is also another element. The sharp motor should have the proper amount of rubber, steel, glass, paint in order to manufacture automobiles.
Related and supporting industries- This is the second factor that should be considered by the Sharp motors in order to set up a manufacturing plant in Thailand. Related and supporting industries refer to the other small industries which supply ancillaries to the main company.
The Sharp motors need ancillaries supplying industries that would supply raw materials. These are in fact the supporting industries. These industries are those who would share the manufacturing activities' and fall under the category of a value chain. Related and supporting industries are more or less available in Thailand which can help the manufacturing unit of Sharp motors to get advantages like innovation, upgrades, share of technology. From the data of many countries statistics, there are many supporting and related industries and industries in Thailand that are related and supporting industries. Besides, the auto components of the country contribute to 50% of the total production (Grant 1991, p.535). This makes it clear that there are many related and supporting industries in Thailand.
Firm’s strategy, structure, and rivals- Firms strategy is another factor which should be considered. The conditions of Thailand would help Sharp motors to know about the way of making an establishment in Thailand. Thailand has a particular management structure, employee morale and the formation of companies.
In order to establish a manufacturing unit in the country, Sharp motors would have to be familiar with the composition of the automobile industry and the structure along with the business strategies that it should adopt for the country. Besides, the company should also consider the nature and the number of rivals that it would have to face in order to operate in Thailand.
In Thailand, the structure of automobile industry consists of two parts. The first category is the passenger's cars and the other one is the commercial vehicles. There are companies that produce two wheeler and four wheeler vehicles and there are other automobile producers that produce big commercial vehicles. In Thailand, two wheeler cars are the most popular vehicle and the sales of such cars are the highest. 81% of the automobiles sold are two-wheelers (Lall, 1980, p.15). Sharp motors will have to look on their line of products and then decide to set up a manufacturing unit in Thailand.
Moreover, in Thailand, automobile firms adopt a strategy to produce quality goods at fair prices. As Thailand is still a developing economy expensive cars are not sold. Automobiles that have fair prices are sold faster than expensive cars (Kumar, 2002). So, if Sharp motors decide to set up an automobile manufacturing plant it should adopt a strategy to manufacture quality and reasonable price cars.
In Thailand, there are many domestic car producers who would probably be the rivals of Sharp motors. In order to get competitive advantage Sharp motors need to compete with prices as Thailand consumers look upon prices at first.
Demand conditions for automobile industry- There is a rapid increase in the demand for automobiles in Thailand (Porter, 2000, p.15). Besides, the government of the country is inviting foreign producers to set up cars industries so that the demand can be raised further. In addition to this exports are being encouraged by the government.
PESTLE analysis of the country
PESTLE analysis covers various aspects of the country Thailand and has determined important factors that are as follows:
Political factors- Thailand is considered as a country which has different political parties. The ideologies and the interests of different political parties are different. Moreover, the taxation system is more or less fair. The government has adopted privatization policy and easy international trade policy to invite foreign players in the industry (Shende, 2014, p.1). The country is democratic in which the government is formed through an election and the majority party is involved in forming the government.
The Sharp motors would have to face the political parties as politics is an integral part of Thailand.
Economic factors- Thailand is identified as a stable economy after the reform policies that were introduced by the government. Economic factors refer to the interest rate, inflation, GDP and the labour laws. The country has reached a GDP 5% in the year 2014 which is increasing (Shende, 2014, p.1).
The government has made certain liberalizations in order to encourage the foreign manufacturers. In order to encourage the growth of automobiles, the government gives loans to foreign players at the low-interest rate. In addition to this labour rate is quite low in the country which would help the Sharp Motors to manufacture cars with lower labour costs.
Social factors- The social factors refer to the standard of living, income distribution, and social belief of the people who belong to the country. It also involves the rate of growth of income of people. As people have more income they tend to lead a comfortable lifestyle by purchasing personal use automobiles. Besides, cars whose prices are between 8000-12000 dollars have a high demand in the country (Arshinder, Kanda & Deshmukh, 2007, p.240). This is because the social upliftment of Thai consumers takes place when they have owned a four-wheeler. Individuals are satisfied and happy and they get social respect when they have cars no matter whether the car is cheap or expensive.
Such belief and the comfortable lifestyle of the people benefit and the Sharp motors can get a good market in Thailand if it is able to manufacture attractive cars at cheap prices.
Technological factors- These factors comprise of the technologies that are adapted to produce goods and services. Currently, the country is technologically developed and the country uses the internet technology to know about the wants and the expectations of customers through social sites. The automobile industry has been given permission for conducting research and development. National Automotive Testing is an initiative that has been undertaken by the government so that the automobile industries can adopt technologically improved methods of production of cars (Arshinder, Kanda & Deshmukh, 2007, p.240).
Moreover, the government encourages foreign players like BMW to set up car producing industries which would use foreign technology. These are the technological factors which would help the Japanese car company Sharp motors to make further research and development regarding the manufacturing of cars if it enters the Thailand industry.
Environmental factors- The environmental factors refer to the carbon emission laws, green strategies and the sustainability policies that are adapted for the production of automobiles in the country. The government has restricted excessive usage of carbon. Besides, the green laws consider the laws to protect the environment.
Such appropriate environment would help Sharp motors to set up the manufacturing unit in Thailand by following sustainable development policies.
Legal factors- Legal factors refer to the tax laws, wage laws and the other corporate regulations that need to be followed in order to set up a manufacturing unit. It also refers to the laws that are adopted by the government to restrict industrial pollution. In order to make sure that hazardous wastes are not generated the government has given certain guidelines that need to be followed by the Sharp Motors before it sets up its production unit in Thailand. Sharp motors cannot generate any hazardous wastes that can cause pollution.
Benefits and limitations of Sharp Motors by entering the Indian market
Through the analysis, Sharp motors would get face certain benefits and limitations by setting up the manufacturing unit in Thailand? The benefits are:
Cheap labour- As labour rates are low the company can hire skilled workers at a low cost. The cost of labour would be least in the production of an automobile vehicle.
Subsidies- As the government of the country gives subsidies the Sharp motors can avail subsidies on setting up manufacturing establishment in Thailand. Such subsidies would help the company to reduce its manufacturing costs of automobiles (Dahlman, Ross-Larson & Westphal, 1987, p.759).
Liberalized policies- The business policies of the country are liberal so the foreign player Sharp motor can conduct the manufacturing operations with ease. The company would not have to face complex taxation and other business laws (Dahlman, Ross-Larson & Westphal, 1987, p.759).
Along with this, the company has to face certain limitations. The limitations are:
Strict environmental laws- As the environmental laws are strict the company would have to incur a huge expense for proper drainage of the industrial wastes, carbon laws, sustainability laws and laws to reduce noise that occurs during manufacturing of vehicles.
Political turmoil- As politics is an integral part there would be workers unions in the manufacturing unit of the company (Dahlman, Ross-Larson & Westphal, 1987, p.759). This would lead to strikes and lockouts which would hamper production.
From the analysis, it is clear that Thailand automobile sector is undergoing rapid development and the government of the country is trying to invite foreign players to enter the automobile market. The PESTLE analysis and the Porters model give an overview and make it clear that a foreign player can more or less perform in the Thailand automobile industry.
Thus Thailand market has both advantages and disadvantages for the company to pertain business. Sharp motors should enter the Thailand automobile industry because of cheap labour rates, easy business policies and subsidies given by the government regarding the adoption of improved technological production. On the other hand, the Sharp motors should be cautious about the noise and industrial wastes that are generated while production of cars as the environmental laws is strict.
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