Thailand Market Haier example essay topic

Executive Summary Thailand is an attractive place for foreign investments. It supplies political stability, increasing market potential, regional marketing centre, low labor cost, and government preference support to foreign investment. Another advantage is that ethnic Chinese in Thailand can help Haier to sustain the advantages, furthermore they can use their own business network in the region to expand Haier's business in South-east Asia. It is suggested that a joint venture plant in Thailand. However, Haier must take some negative factors into account: Skill labor shortage, aggressive competition, anti-Chinese phenomenon, corruption and protectionism. The establishment of joint venture plant can help Haier to maximum positive factors and minimum threats.

To succeed in the Thai market, it is suggested that Haier: 1. Selects right partner, who has its own business network in the Asia Pacific Region and keep good relationship with government, to be in charge of strategy implementation, local Chinese are preferred; 2. Concentrates more on local and Southeast Asia market for promoting sales in further; 3. Investigates local laws, culture, industrial relation and others which are necessary to do business; 4. Provides scholarship funds to local universities to attract potential employees and foster a loyalty to Haier brand; 5. Pay more attention to local social duties and responsibilities, such as environmental protection, occupational safety and health to establish brand image of Haier; 6.

The strategy should be implemented as soon as possible, before more competitors enter the market and local policies change. 1.0 Introduction Following globalization and industrialization, survival in the global marketplace depends upon responding rapidly to change and challenges both domestic and international markets (Lasserre & Schutte 1998). Haier Group, a Chinese home appliance giant, hopes it can transform from local a company to a multinational company. Although Haier has won worldwide recognition by exporting white goods to more than 100 countries, it still needs to put great efforts on extending business into other countries and areas, such as U.S., Europe and ASEAN countries (Haier Group 2003). The objective is to set up manufacturing base in developing countries support cheap labor and provide development potential for the market. Through localization to each country, Haier hopes to create a world famous brand.

To customize a Thailand strategy for Haier is closely aligned with Haier's mission and global strategy. This report will try to generate optimal entry mode for Haier through macro-environment analysis which includes market potential, competition environment, legal and political environment and socio-cultural influences (CQU 2002). 2.0 Company Summary 2.1 Haier's Background Founded in 1984, Haier from a small workshop became one of the largest companies in China with annual sales of $8.67 billon and employ more than 30,000 people in year 2002 (Haier Group 2003). Haier's business has increased faster than any other household appliance manufacturers in the world (Ritchey 2002). By the end of year 2002, Haier is the biggest home appliance manufacturer in China and the 5th biggest in the rest of the world. Its products involved in 86 categories which include refrigerator, wash machine, air conditioner, personal computer, mobile phone and so on (Zhang 2003).

2.2 Haier's Mission On the basis of white goods, by implementing international strategies, Haier aims to create a world-famous brand and be ranked one of the top 500 companies in the world (Haier Group 2003). 2.3 International Strategy Haier began to plan and implement international strategies 10 years ago. Haier believes that the success in international market is as important as in domestic markets. The goal of Haier's international strategies is "Home design, made and sales all over the world" (Haier Group 2003).

Haier has set up some factories by joint venture or acquisition in Indonesia, Philippines, Malaysia, Iran, US and Italy (Haier Group 2003). 'The strategy competing on image, rather than price' (Ritchey 2002). Haier's management continually pay the most attention to construction of brand image, this is to avoid price competition and differentiate itself with other competitors. 2.4 Thailand Strategy of Haier To transplant the mass productive industries out of China in future, Haier can concentrate on developing high-value-added products and transforming to a multinational company. Setting up an enterprise in Thailand is not only to take advantage of local cheap and skilled labor, assets, resource and potential market, but also to align with factories previously established in Indonesia, Philippines and Malaysia to form a productive base.

The outcome of this strategy will sustain and increase orders from US, Europe, the Middle-East and ASEAN countries. The products produced by the enterprise in Thailand will be mostly exported to US and Europe markets, and also within the region and other countries. To establish a new business in Thailand will be considered a component of productive base in Southeast Asia in future. Export to US and Europe can bring Haier more profit in view of local cheaper labor and geographic advantage. The sales in Thailand can spread Haier's brand and reputation. 3.0 SWOT Analysis 3.1 Strength Clear Mission and strong corporate culture Haier's mission statement and corporate culture strongly supports implementation of international strategies.

Management expertise Haier has a scientific management system and numbers of experienced managers in doing international business. Haier is the first company in China, whose successful business experience and advanced management method were quoted as case studies into Harvard University's text books (Haier Group 2003). International operation experience Haier has sufficient management experiences in operating overseas plants which has built 48 manufacturing plants worldwide (Ritchey 2002). The successful experiences in Indonesia, Malaysia and the Philippines will provide the experience to run a factory in Thailand. Advanced technology Haier's advanced technology contributes to high quality refrigerators, air conditioners and other products.

The Haier Group introduced manufacturing technology for refrigerators from Germany and begun cooperation with Sanyo recently. By introducing technology from abroad and then adding further improvements of its own, Haier was able to put on sale a chlorofluorocarbon-free refrigerator in 1993, ahead of other companies (Japan Economic Foundation 2002). Haier has information centres located in 10 counties to absorb prevailing technology and business information and also has it own R&D centre in China (Haier Group 2003). Stable market share Haier has a stable market share in both domestic and global market. So it provides a large market for products made in Thailand in the future. Haier sells it's production in more than 100 countries.

In the U.S., Haier sold $200 million worth of goods in 2000 (Ritchey 2002). Haier sustains 27.7% market share of home appliance in China (Japan Economic Foundation 2002). Sufficient finance support Haier's business volume increased dramatically during the past 18 years. In year 2001, annual sales reached US$7.5 billion with a profit US$80 million (Haier Group 2002). The excellent performance on finance will support Haier's foreign investment. Cheaper Price, good quality The prices of Haier's products are lower than other Western firm's products and the qualities are good, so they are very popular in developing countries.

3.2 Weakness Brand image Owing to short company history, the brand image is not as famous as other home appliance giants, such as Whirlpool, LG, Siemens (Zhang 2003). Low value-added production Most Haier's products are not high-tech-added products, so the competitiveness is limited. State-owned company Haier is a state-owned company. In China, a state-owned company is likely to be influenced by the government's policy and not very flexible in doing business abroad. Investing abroad is still controlled and surveyed by the government. Lack of understanding of Thailand market Haier has no experience in doing business in Thailand and familiarization of local cultural, political and legal environment are low.

3.3 Opportunity Market Potential The population of Thailand is approximate 60.7 million (World Bank 2002). The GDP per capita is $1960 in recent years (Jarvis 2003). Due to the aggressive opening of new outlets of foreign large-scale retail operators in Thailand, the need for commercial refrigeration systems has increased after 1999. Additional, Fishing industry is a major sector for the Thai economy. Roughly 60% products in terms of industrial and commercial refrigerators are mainly imported from US and Europe (Kirby 2001). Following the development of the Thai economy, there is growing domestic market for home appliances, especially for refrigerators and air conditioners.

Thai industry has been developed since 1970's, electronic industry plays an important role in the economy. The raw material supply of home appliance can satisfy Haier's requirement. The economic and income level determine that majority of Thai people easily accept commodities at lower price with good quality, that's what Haier is. Haier will succeed by offering quality, reliable and valuable products in the price-conscious Thailand marketplace.

Human resource Thailand has an estimated 32.6 million work age population (World Bank 2002). Skilled labor in Thailand is cheaper than other Southeast Asian countries. An average monthly wage in the electronics and electrical industry was about US$150, which increased to US$187 in 1998 but which is still lower than that for South Korea, Taiwan, Hong Kong, Singapore, and Malaysia (U.S. Department of Commerce 1999). The unemployment rate is still high after Asian crisis in 1997, the sufficient labor force and high unemployment rate means that Haier can hire more cheaper, qualified and loyal employees. Geographic Most international companies recognize the long-term potential within Southeast Asia's regional markets (Lasserre & Schutte 1999).

The strategic location of Thailand is at the center of Southeast Asia which has over 150,000 kilometers of road network (KMP G 1997). Thailand is a growing manufacturing and distribution centre for regional marketing offices for the newly emerging regional economies, like Laos, Cambodia, Vietnam, and Myanmar. Other countries in the region include Singapore, Malaysia, Indonesia, and the Philippines. Thailand belongs to the tropics, the climate is hot and humid. The demands of refrigerator and air conditioner is large. Thailand is one of the most famous tourism countries in the world.

In 2001, 10 million tourists traveled in Thailand from the rest of the world (Bangkok Bank 2002). This means the advertisements and other promotion activities can increase brand familiarity worldwide. Therefore, establishing a business in Thailand is conforming with Haier's global strategy and the objective of building a world famous brand. Legal and political environment Thailand offers political stability, it is the only country never to be colonized within the region (Livingstone 1998). Thailand is a member of the WTO, which means a free local market and easy entrance to global market.

Historically, the Thai government runs a favorable policy on foreign investment and encourages exports. With regards to the structure of import duties related to the industry, certain reductions have been made in line with the free trade policy. Duties on some electronic parts have been reduced to 1%, and to 5% for computers and computer parts. However, import duties on some items are still high (U.S. Department of Commerce 1999). To establish a factory in Thailand can help Haier to avoid the tariff barrier. In the 1970's, the Thai government began to drive for industrialization and a move towards NIC status.

The Thai government gradually changed stance and moved from import substitution in the 1970's to export orientation in the 1980's. By giving incentives to encourage exports, especially by foreign companies which own plants in Thailand (Livingstone 1998). Furthermore, Haier can reduce cost through export subsidy of Thai government. Investment environment The Thai government plays a major role in establishing the conditions for Thailand's economic recovery. Government efforts and policies have stabilized the currency, lowered interest rates, liberalized regulations governing foreign investment, strengthened the bankruptcy regime and remedies available to creditors, and forced financial institutions to recapitalize (U.S. Department of State 1999). In 1999, the Thai government approved the 'Electronics Master Plan', this plan is designed to create a cooperation among three government agencies which will implement a unified policy on electronics industrial matters (U.S. Department of Commerce 1999).

This shows the Thai government's recognition of the electronics industry as an essential part of Thailand's economic development. The improved investment environment which stated above means that Haier can receive more support from the Thai government. Thailand urgently needs foreign capital since 1997 to help the recovery. Thai government adopts a flexible approach to foreign investment and while Tai foreign joint ventures are favored (Gomez & Hsiao eds. 2001). Thailand's government has regulations on foreign investment related to product destination, if production is mainly for domestic consumption, foreign ownership is a maximum of 49%, if over 50% of output is for export, foreign ownership can be a majority (Capon & Vanhonacker 1999).

As a result, Haier can not sell products in a large quantity locally, which are made in Thailand. By this regulation, the Thai government force foreign investors to export their products. This is not again our strategy, because Haier's major target market is in the US and Europe. Scio-cultural influence Thailand has a largely Buddhist population in contrast with the dominantly Muslim or Christian populations of other parts of the region. As a general rule, Thais dominate in agriculture activities while Chinese control the most business sector (KPMG 1997). A significant proportion of the locally owned industries is in the hands of the Chinese communities (Livingstone 1998).

Most Thai Chinese still keep the Chinese tradition and customs. For a Chinese company like Haier which has a common language and same cultural background with local ethnic Chinese, it is easier for to effectively communicate with local business people in which they have built business network within the country and region. So Haier can adopt local business environment faster than Western firms. 3.4 Threat Labor The skilled labor includes about 10,000 university level engineers, a further 80,000 technicians at college level.

They are graduates in various industrial fields and the number of graduates are increasing every year (U.S. Department of Commerce 1999). However, skilled labor shortages is a main problem which constraints the economic growth owing to poor education structure and low research productivity. Competition There have been many joint venture enterprises in fields of electronics industries. LG electronic not only take the leadership in the world, but also take the leadership in Thailand in terms of refrigerator sales (Leong, Ang & Tan 2001). LG electronics, Sharp and Whirlpool has takes most of market shares of home appliance in Thailand (Japan Economic Foundation, 2002).

The entrance to Thailand will be tough for Haier. However, for a company who intends to succeed in the global market, such competition is inevitable. Scio-cultural influence Historically, Mao's communist party tried to export communism revolution to South-eastern countries. Accompanied with the factor that ethnic Chinese in the region are much richer than other native people, many governments in South-east countries implement anti-China policies (Gomez & Hsiao eds. 2001). Finding a local partner may help Haier solve this problem.

Protectionism The increasing inward-looking policy of Thai government may have bad effects for international business and investment. Corruption The corruption in Thailand is endemic or convention in government due to the low salaries (Livingstone 1998). Haier must take this factor into account when starting business in Thailand.